Cup-with-Handle Breakout
NO EDGEWinners consolidate in a rounded 'cup' with a shallow 'handle', then break out on volume - the entry point of the CANSLIM system.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 1.2% | 9.0% |
| Return per unit of risk (Sharpe) | 0.18 | 0.66 |
| Worst fall (max drawdown) | -40.3% | -52.6% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): 6.4% a year against 12.4% for the benchmark; Sharpe -0.14 in the training years, 0.57 after.
After 25 bps of trading costs: -1.7% a year. EDGE OVER RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 0.0% | 15.5% |
| 2000s | -3.8% | -2.6% |
| 2010s | 2.1% | 11.6% |
| 2020s | 9.7% | 14.1% |
// THE IDEA, AS PUBLISHED
William O'Neil, 'How to Make Money in Stocks' (1988), base patterns · 1988
- Prior uptrend of 30%+; cup of 7-65 weeks, rounded, typically 12-33% deep
- Handle of 1-2+ weeks drifting down on light volume in the upper half of the base
- Buy as price clears the handle high (pivot) on volume 40-50%+ above average, not more than 5% past it
- Cut the loss at 7-8% below cost
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 20:48 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE NOT IN THIS UNIVERSE YET (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE.