Recently, I have been studying a very interesting technical pattern called the inverted cup and handle pattern. This chart looks like an upside-down cup with a small handle on top, usually appearing at the end of an uptrend, serving as a good sell signal.

Let me break down how this pattern forms. First is the inverted cup stage, where the price rises then falls, forming a clear high point, then rebounds upward, but the rebound is not strong enough, creating a U-shaped curve. For example, the price rises from 100 to 70, then rebounds to 95, which is the first step.

Next is the handle stage, which is critical. After the rebound, the price undergoes a slight correction, but this correction is weak and cannot break through the previous high. The price might fall from 95 to 88, then rebound to 92, but it just can't go higher. This is when you should be alert.

The real opportunity comes when the price breaks below the support line beneath the handle. The inverted cup and handle pattern is then complete, signaling a strong bearish outlook. The price may drop directly from 92 to 85, 80, or even lower.

How to trade this? Enter a short position when the price breaks below the support line. How to calculate the target? Take the difference between the highest point of the cup and the lowest point of the cup, and project this distance downward from the breakout point. Set the stop-loss above the handle so that if you're wrong, you can exit quickly.

A few details are very important. First, ensure that the volume is high when the price breaks the support line, indicating strong selling pressure. Second, don't rush in before the pattern is fully formed; wait until the complete inverted cup and handle pattern appears. Third, it's best to use indicators like RSI or moving averages together; multiple signals resonating improve reliability.

This pattern can be seen across various timeframes—daily, weekly, hourly. Next time you see this upside-down cup with a handle, you'll know it's time to consider exiting or shorting.