Saucer with handle base

Quick definition

Like a cup-with-handle base, a saucer-with-handle base is a price consolidation that a stock goes into after a prior uptrend.

Key details

• A saucer with a handle base is a similar chart pattern to a cup with a handle base. 
• The key difference is it looks like a ‘saucer’ as opposed to a ‘teacup’. 
• A saucer-with-handle base requires a strong prior uptrend of 30% or more. The base should then see a total decline of 12% to 30% from top to bottom.

What Is a Saucer-With-Handle Base?

Like a cup-with-handle base, a saucer-with-handle base is a price consolidation that a stock goes into after a prior uptrend. The difference is that if you draw an outline around this type of base, it will look like a saucer (as opposed to a teacup), with a handle at the end of it.

Why Is a Saucer-With-Handle Base Important for Investors?

No stock can keep rising forever. At some point, even the best stocks will need to pause and pull back before going on their next big run. A saucer-with-handle base represents that all-important breather. 

Once a stock has spent the requisite amount of time consolidating in a saucer-with-handle base, it will set up for a breakout (more on breakouts in a future lesson). Once that breakout occurs, that’s your time to jump in, either buying shares for the first time, or adding to your position if you’ve been holding for a while.

What Are the Stages of a Saucer-With-Handle Base?

Following an uptrend, the stock starts to pull back. That pullback forms the left side of a saucer-with-handle base. Because saucer-shaped bases take longer to form, the stock’s overall drop in price will appear more shallow than in a cup-with-handle. The basic principle remains the same, though: The stock forming the left side of its base indicates that institutional investors are unloading shares, causing a decline in the stock’s price.

At some point, the selling will subside, causing the left side of the saucer-with-handle base to stop, and for the stock to hit the bottom of its base. As it does, the base will go from a downslope to an upslope, forming that rounded bottom that resembles that of a saucer.

The right side of the base forms in a similar fashion, forming what looks like the right side of a saucer shape that’s flatter than the cup shape seen in a cup-with-handle. This right side of the base occurs as buyers grab shares.

Finally, a handle forms at the end of the base. In that handle, the stock should only edge mildly lower, usually in light volume. That brief pullback serves as a final shakeout of uncertain investors before a breakout can occur. 

What Are the Prerequisites of a Saucer-With-Handle Base?

Like every type of base, a saucer-with-handle base requires a strong prior uptrend of 30% or more. The base should then see a total decline of 12% to 30% from top to bottom. The silhouette of the base should resemble a saucer, with a handle at the end. 

Any type of base that has a handle at the end of it needs at least five days to form. Since saucer-shaped bases take longer to form and complete, the handle at the end of a saucer-with-handle often takes even longer to form, up to several weeks. The handle shouldn’t dip lower than the bottom of the saucer shape as a whole.