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An inverse (or inverted) cup and handle is a bearish pattern that mirrors the standard version. The cup is an upside-down rounded dome instead of a U, and the handle is a small upward drift on the right side before price rolls over. It signals that sellers are gaining control and price is likely to break downward. As with all patterns it shows probability, so a confirmed break below the handle is used to validate it.

An inverse cup and handle is typically viewed as a bearish chart pattern. Traders may look for a break below the handle’s support as confirmation of a potential downward move, with some waiting for a retest of the broken level. The pattern’s measured-move target is commonly estimated by measuring the height of the inverted cup and projecting a similar distance downward from the breakdown level. Because chart patterns can produce false signals, confirmation and appropriate risk management are important. CFDs are complex instruments and carry a high risk of losing money.

Look for a prior downtrend or a topping area, then a rounded, upside-down dome where price rises and falls back gradually, forming the inverted cup. The handle is a small upward or sideways bounce on the right that fails to make new highs before price breaks lower. Volume often eases during the dome and expands on the breakdown. A rounded top, not a sharp spike, makes the pattern more reliable.

It signals a likely bearish move, either a reversal of a prior uptrend at a top or a continuation of an existing downtrend. The pattern reflects buyers losing momentum: the rounded top shows fading demand, and the failed handle bounce shows sellers stepping back in. Confirmation comes when price closes below the handle’s support. Until that break, the bearish outcome is only a possibility, not a certainty.

The measured-move target takes the height of the inverted cup, from the peak of the dome down to the rim (the breakdown level), and subtracts that distance below the breakdown point. For example, a dome 80 pips tall projects roughly an 80-pip decline below the handle breakdown. This is an approximation, so traders pair it with a stop above the handle and careful position sizing to manage downside risk.

A common mistake is confusing it with the bullish version and trading the wrong direction, since the inverse points down, not up. Others act before the handle breakdown is confirmed and get caught by a bounce, or mistake a sharp spike top for a proper rounded dome. Skipping a stop above the handle is another error. Waiting for a decisive close below support, with volume, improves reliability.