The chartist figure in cup and handle is a continuation figure formed by two rounded hollows, the first being deeper and wider than the second.
The tops of the cup and the handle are aligned on the same horizontal resistance line. This line is called the neck line.
For the figure to be valid, several rules must be respected:
- The cup figure with handle must be preceded by a significant upward movement.
- The low of the trough of the cup must be less than 50% of the upward movement preceding the formation of the pattern.
- The lowest of the hollow of the handle must be less than 50% of the height of the cup.
The shape of the two troughs can make one think of a rounding bottom, which reflects the progressive exhaustion of sellers. Buyers gradually regain control once the neckline is crossed (psychological threshold), the buying force then becomes very strong.
The objective of the figure in cup with handle is calculated by deferring the height of the cup to the point of breakage of the handle. However, it is more advisable to postpone only half the height of the cup according to the studies of T. Bulkowki.
Notes and Statistics: #
- If the cup has a lower left side than the right side (upward neck line), the performance of the figure is more important.
- It is advisable to wait for a pullback in support on the neck line before considering opening a Long position (when buying) after the formation of a cup figure with handle.
- In 79% of cases, the output of a cup and handle is bullish.
- In 73% of cases, the objective of the cup figure with handle is reached (half the height of the cup), after breaking the neck line.
- In 74% of cases, after exit, the price carries out a pullback in support on the neck line. price shows false line breaks, or false triangle exits.