What is a Saucer Pattern?

The saucer pattern is quite often forgotten about. Although in theory it should be easy to identify, in practice it is sometimes more difficult to identify at the time of forming compared to a Cup with a Handle.

Key Takeaways

-Ending price each week within the pattern should be within 12%

-Minimum time to form should be 6-8 weeks, so BE PATIENT!

-Be cautious of any shakeouts due to company-specific news, rather than overall market sell off


Formation

When several weeks close near the same price, forming a flat ending price pattern, this is called a saucer. The price within those weeks can fluctuate in varying degrees, but the important sign to look for is the price the week closed at. The center of the saucer is slightly lower than the sides, but usually not more than 10% lower.

A basic diagram of the general shape from Investopedia.


Saucer patterns may or may not have a handle, similar to the cup and handle pattern. In most examples there will be a handle, and that handle tells us more about what is happening. Usually the handle represents the last shakeout of investors that are looking to sell the stock at the current price on a day where the markets aren’t doing well or there is concerning world news for the market as a whole. This handle doesn’t usually drop the price more than 8%-12% before big volume comes in to buy and send the price upwards past the saucer price point, our buy point. 

Time Frame

Generally a saucer chart pattern should take a minimum of six weeks to form before it breaks out or fails. This time frame would include the handle portion of the pattern, if it exists.  Investors.com gives a great explanation on being patient in a saucer pattern.

Warning Notes

As always, be cautious of any shakeouts that are directly related to news about the company itself. For the best stock breakouts, the shakeouts and downtrends in these patterns are related to macro trends in the market, and not due to negative news about the company itself. This is not to be confused with market direction change. If the market is a confirmed bear market (on the downtrend consistently) it is usually best to be extra cautious about starting new long positions. 

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts