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Cup and Handle Patterns

Cup and Handle Pattern on #FB

Cup and Handle Pattern on #FB

Cup and Handle Pattern on #FB is a classical chart pattern, pretty similar with the Cup and Handle Pattern on #AMZN. Actually both have the same implications. Let’s take a closer look.

First things first

#FB (Facebook, Inc.) is the biggest social network from the entire world. So, there is a huge interest in its shares. Even so, on daily timeframe there are still a lot of area (local) gaps that suggest a weekly chart instead of a daily one, for a safer trade. I explained more about this subject here: Double Bottom Continuation Pattern on #JNJ.

The premise

Now, if we take a look at the weekly chart, we’ll see an uptrend. But, at this moment there is a cup and handle pattern which suggest the fact that the price is in a consolidation phase. And, this consolidation came with a high probability of continuation. So, all we have to do is to find a nice place to enter the market.

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Cup and handle pattern on #FB weekly chart

How did I trade the cup and handle pattern on #FB

Being a classical chart pattern, our cup and handle formation can be traded in the classical way. Therefore, I placed my buy stop order slightly above the July, 21st 2019 weekly candle high. Consequently, my order is open on February 10th 2020.

The outcome

Just like my IBEX 35 trade, the price went north for a while after the breakout. But, after that, the weekend with coronavirus outbreak in Italy occurred and the entire stock market went crazy. My trade wasn’t an exception. So, as you might gues, my stop loss order was hit for an entire risk loss.

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The outcome of the cup and handle pattern on #FB weekly chart

The conclusion of the cup and handle pattern on #FB

I know that if you read my previous articles it became a bit redundant that I lost a few trades in a row because of coronavirus. But, unfortunately this is part of trading. And this is also why it is important to use a proper risk and money management. There are times when you make money. And, there are times when you see all of your trades going against you. For example, with two or three days before the coronavirus outbreak in Italy I had all my open trades from that time: USDCHF, #AMZN, #NFLX, #JNJ, IBEX 35, WTI and even NASDAQ in profit for a total of more than +5% (plus five percent) of my equity.

Plus five percent turned into almost minus four percent

After the coronavirus weekend all my trades went against me and I had a total loss of almost 4%. To be more accurate I was down -3.77% (minus three point seventy-seven percent). You can see for yourself here: Capital Patterns verified trading results. It is the period from February 21st 2020 when my account was -7.57% (minus seven point fifty-seven percent) to February 27th 2020 when my account dropped to -11.70% (minus eleven point seventy percent). Now, imagine how I felt when instead of more than +5% (plus five percent) gain, I got a -3.77% (minus three point seventy-seven percent) loss.

Why I didn’t protect some profits?

You may wonder why I didn’t protect some profits. The answer is simple. Just because none of my trade management rules wasn’t met and the market completely ignored the coronavirus for more than a month before the Italy outbreak. But, stay tuned for the next articles, because after a few days also “because” of the coronavirus I managed to bring the account back to -6.72% with only 4 transactions keeping the same risk of 0.5% (zero point five percent) per transaction. That mean a gain of more than 4% with a total risk of 2%.

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