Going cup in hand to the Shanghai market

Chart patterns sometimes fail and when they do it is important to adjust analysis to recognize the new situation. The long term cup and handle pattern in the Shanghai Index signaled failure in the last week.

The failure is created by the degree of the retreat from the upper edge of the cup pattern. The cup and handle chart pattern is most clearly seen on the weekly chart because it consolidates the clutter of daily price activity and gives a strategic perspective.

The perfect cup and handle pattern starts with a series of lows that are captured with a curved half circle trend line. It is a retreat and recovery pattern. The upper starting and ending points of the pattern define the lip of the cup. Many of these cup patterns go onto develop a handle. The handle is created by a price retreat from the upper right hand point of the cup pattern. The cup and handle pattern in the Shanghai Index weekly chart is not perfect but it largely follows the pattern. A fall of more than 50 percent in the Shanghai index cup and handle pattern is signaled by the move below the 3,000 level.