Is BankNifty in a classical Cup & Handle Formation. How are technical targets derived

Vital Signals for Cup & Handle Formation

·         Cup with handle patterns are very similar to double top patterns with the exception being that selling does accelerate after the formation of the second top, instead the stock consolidates and eventually pushes beyond overhead resistance on strong volume.

·         Generally, most cup with handle patterns are completed over the course of 9 -16 weeks and involve two separate pullbacks of 20 - 50 percent (cup portion) and 8 -20 percent (handle portion).

·         Upside breakout from the handle portion of the pattern should occur on strong volume.  This increase in volume verifies that selling pressures have been satiated.

·          Upside breakouts often lead to small 2-3% rallies followed by an immediate test of the breakout level.  If the stock closes below this level (now support) for any reason the pattern becomes invalid. 

Now that we have an understanding of the cup with handle pattern, let's take a closer look at the BANK NIFTY WEEKLY CHART AS ON MAY 20, 2012.

How Are Technical targets Derived?

The technical target for a cup with handle pattern is derived by adding the height of the "cup" portion of the pattern to the eventual breakout from the "handle" portion of the pattern.

So what are the upside targets on long term basis if 11,000 manages to hold.

Target 1: 15,000 Target 2: 18,000 

( As per the classical cup & Handle breakout formation)

BANKNIFTY FUT WEEKLY CHARTS -20TH MAY