The Power of the Cup and Handle

This column was originally published on RealMoney on Jan. 3 at 1:05 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Many powerful patterns in the stock market offer potential measurement plays to both the upside and downside. Today I want to talk to you about what I feel is the most powerful of them all, because of the time it takes to form and because of the very strong upward measurements it usually has.

It is important to know, however, that there are many rules involved in this pattern -- known as the cup and handle -- that, if not followed properly, will bring you a lot of unnecessary pain.

The Nazz is in this pattern currently, and you can see the length of time it took to form. Eight long months, but oh, how important it is to know how to play it properly, because the measurement up will surprise all of you. ...