Cup and Handle Pattern, Found on Gold Candles

What it shows

A smooth arc through the left rim, the bottom and the right rim, then the handle as a line through its dip and its last high, a dotted extension of the handle line to the breakout, a "Cup and Handle" label above the cup, and after the breakout a dotted target line ending in a Target label.

How Pravex works it out

1. Pravex works on swing points from the latest 600 candles. A swing low is a low under the 5 lows before it and not above the 5 lows after it, and a swing high mirrors it. Nothing can be called a swing until those 5 later candles exist. Where two lows (or two highs) follow each other, only the deeper low (or the higher high) is kept, which leaves a clean high, low, high sequence.
2. Rims: two swing highs of the same kind (any number of swings apart) at least 20 candles apart. The cup’s bottom is the lowest low between them. Depth is the distance from the lower rim down to that bottom.
3. The rims must be level (they may differ by no more than the Rim match share of the depth), no high between them may exceed the higher rim by more than 2% of the depth, and the bottom must sit in the middle half of the span between the rims. The curve drawn is a smooth arc through the rims and the bottom; the code does not measure how round the real candles are.
4. If Cup depth limit is on, the depth may not be more than that percent of the rim price. The handle is the next two swings after the right rim: a dip of no more than the Handle depth limit share of the depth, then a swing high that is not above the right rim, reached within as many candles as the cup is wide.
5. Breakout: the first candle that closes above the handle line (the line from the right rim to the handle’s last high). The target adds the cup depth to that line’s price on the breakout candle. Failure level: the handle’s low; a low under it before a breakout drops the shape.
6. Four statuses follow the breakout. Awaiting means neither the target nor the failure level has been hit yet. Reached means a high or low got to the target first, Failed means the failure level gave way first, and Indefinable means both fell inside one candle, so their order is unknown.

Settings

Setting	Default	What changing it does
Which patterns to keep	All	A status filter. All draws every pattern found; the other three remove patterns by status: Failed and Indefinable ones go with Awaiting and Reached, everything but Awaiting goes with Only Awaiting, and Last Awaiting keeps a single one, the latest Awaiting pattern.
Where targets are drawn	Only Awaiting	Turns the dotted target and its label on by status: for every pattern (All), for Awaiting ones only, for Awaiting and Reached ones, or for none. The pattern shapes are not affected.
Rim match	10	How far apart the two rims may be, as a percent of the cup depth. At 10 they must sit within a tenth of the depth of each other. Raise it to accept lopsided cups.
Handle depth limit	50	How far the handle may dip, as a percent of the cup depth. At 50 the dip may reach down half the depth. Tighten it for shallow handles.
Cup depth limit	off, 50	A switch and a number. When on, the cup’s depth may not be larger than that percent of the rim price, which screens out very deep cups. Off by default, so any depth passes.
Show unconfirmed patterns	off	Default off: a shape shows up once a close has gone through its breakout line. Switch it on to see shapes forming before that, with a dotted final leg ending at the running extreme since the last confirmed swing, which keeps moving, and the target the shape would carry.

How traders read it

The cup is seen as a slow handover from sellers to buyers and the handle as a last shakeout; a close over the handle line is the signal they watch for. The depth of the cup is the measuring stick for the target.

As a quick illustration (figures invented), the rims sit at 100 and the bottom at 80, so the depth is 20 from the rims. The handle line is at 99 when a candle closes over it. The target is 99 plus 20, which is 119.

When it misleads

Pravex checks that the bottom sits in the middle half of the cup and that the rims are level, nothing more, so a V-shaped dip with the low in the middle also passes; the curve you see is drawn, not measured. A cup needs at least 20 candles between the rims, so on a fast chart it can span days, and on the 4-hour chart it can span months. Two things can still redraw a pattern after it appears. A newer swing that goes further than the last one of its kind takes its place, and a breakout on the candle that is still open counts only if the close holds. Unconfirmed shapes move all the time, since their last point is the running extreme.

Questions and answers

How does Pravex check that a cup is round?

It does not measure roundness. It requires level rims, at least 20 candles between them, nothing poking above them, and the lowest point in the middle half of the cup. The arc on the chart is drawn through the rims and the bottom.

How long must a cup be?

The rims must be at least 20 candles apart, and the handle may take no more candles than the cup is wide.

Where is the cup and handle target?

One cup depth above the handle line at the candle that first closes over it. The depth is measured from the lower rim to the bottom.

Must the handle be smaller than the cup?

Yes, in two ways. The dip may not exceed the Handle depth limit share of the cup’s depth (half by default), and the handle may take no more candles than the cup is wide.

What does Cup depth limit do?

When switched on it rejects cups deeper than the chosen percent of the rim price. It is off by default.

Related: Inverted Cup and Handle Chart Pattern, Double Bottom Chart Pattern, Rectangle Chart Pattern, All Chart Patterns, every indicator.