Art's Charts

Trading the Pattern within the Pattern

Arthur Hill

Arthur Hill

Chief Technical Strategist, TrendInvestorPro.com

There are often smaller patterns within larger patterns and traders can get a jump on a bigger breakout by acting on the smaller pattern first. For example, a cup-with-handle is a bullish continuation pattern that typically forms over a few months. A falling flag is also a bullish continuation pattern, but it typically forms over a few weeks (short-term). I picked these two patterns for a reason because a bullish flag often forms as part of the handle in the cup-with-handle. And, it just so happens that we have a live example.

The chart below highlights InterActiveCorp (IAC) with some classic technical analysis and a pattern within a pattern. First and foremost, the bigger trend is up because the stock hit a 52-week high in February and is well above the rising 200-day SMA.

A large cup-with-handle is taking shape from September to March. This is a bullish continuation pattern that forms within an uptrend. The cup highs mark resistance in the 225 area and the handle is currently under construction. A break above rim resistance would confirm the pattern and argue for a continuation of the bigger uptrend.

Focusing 2019 price action, we can see a sharp advance and then a falling flag, which is a bullish continuation pattern. IAC was quite extended after a 39% move and ripe for a rest. The falling flag provided this rest and the stock broke out with a high volume surge the last few days.

This is the short-term breakout that could lead to a bigger cup-with-handle breakout at 225. I will add IAC to the Art's Charts ChartList with a re-evaluation on a close below 205.  


DIS Falls as Deal Closes

In ChartList news, Disney (DIS) fell rather sharply on Monday-Tuesday. I am not sure of the exact reason, but I suspect it had something to do with the closing of the Twenty-First Century Fox (FOXA) deal (arbitrage-related selling). The stock is near support and I will give it a few days to settle. Re-evaluate on close below 109. Here is the Art's Charts ChartList.


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Questions, Comments or Feedback?

I do not take symbol request and I cannot promise to response to all correspondence, but I will read it and take into under consideration. I greatly appreciate all feedback because it helps me improve the commentary and provides ideas for the future.


- Arthur Hill, CMT

Senior Technical Analyst, StockCharts.com

Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill


Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More