Inverse Cup and Handle: How It Is Found

What it shows

A smooth arc through the left rim, the top of the hump and the right rim, then the handle as a line through its bounce and its last low, a dotted extension of the handle line to the breakout, an "Inverted Cup and Handle" label, and after the breakout a dotted target line ending in a Target label.

How Pravex works it out

1. First come the swings, taken from at most the last 600 candles. A high qualifies when it sits above the 5 highs to its left and no lower than the 5 highs to its right; a low qualifies the opposite way. The 5 candles on the right are why every swing arrives 5 candles after the fact. The list is then thinned so highs and lows take turns, keeping the more extreme point wherever two of a kind meet.
2. Rims: two swing lows of the same kind (any number of swings apart) at least 20 candles apart. The cup’s top is the highest high between them. Depth is the distance from the lower rim up to that top.
3. The rims must be level (they may differ by no more than the Rim match share of the depth), no low between them may undercut the lower rim by more than 2% of the depth, and the top must sit in the middle half of the span between the rims. The curve drawn is a smooth arc through the rims and the top; 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 bounce up of no more than the Handle depth limit share of the depth, then a swing low that is not below the right rim, reached within as many candles as the cup is wide.
5. Breakout: the first candle that closes below the handle line (the line from the right rim to the handle’s last low). The target takes the depth off that line’s price on the breakout candle. Failure level: the handle’s high; a high above it before a breakout drops the shape.
6. The status starts as Awaiting at the breakout. It turns to Reached when price trades at the target, to Failed when price trades through the failure level first, and to Indefinable when a single candle covers both, since its high and low alone cannot say which came first.

Settings

Setting	Default	What changing it does
Which patterns to keep	All	Picks what stays visible. All is the full list. Awaiting and Reached keeps patterns that are live or hit their target. Only Awaiting keeps the live ones. Last Awaiting keeps just the most recent live one, so the chart shows one pattern at most.
Where targets are drawn	Only Awaiting	Chooses which statuses show a target line: All, Only Awaiting, Awaiting and Reached, or None. While a pattern is Awaiting its target keeps the pattern’s colour; after that it takes the colour of its status.
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 bounce up, as a percent of the cup depth. At 50 the bounce may reach up to half the depth.
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 huge swings. Off by default, so any depth passes.
Show unconfirmed patterns	off	On adds patterns that have not broken out yet. Their final leg is dotted and ends at the highest high or lowest low since the last confirmed swing, so it changes with every new candle; the target shown is the one a breakout would give. Off keeps only patterns with a close through the breakout line.

How traders read it

It mirrors the cup and handle: buyers fade over the hump, bounce weakly in the handle, and a close under the handle line shows sellers taking over. The hump’s height is the measuring stick for the target.

Take a pretend chart where the rims sit at 100 and the top of the hump at 120, so the depth is 20 from the rims. The handle line is at 101 when a candle closes under it. Take 20 off 101 and the target lands at 81.

When it misleads

The checks are level rims, at least 20 candles between them and a peak in the middle half, so a pointed spike in the middle also passes; the arc on the chart is drawn, not measured. In a strong uptrend the shape can be a pause before another leg up, and the handle rule only guards against a bounce that is too tall. A swing that is still forming never goes into a pattern, but finished patterns can still be revised. A later high above the last swing high (or low under the last swing low) replaces it and can drop the shape, and the newest candle’s close is not final until the candle ends.

Questions and answers

Is the inverted cup and handle the same as a rounding top?

It is close. Pravex looks for two level lows with a peak in the middle half between them and a small bounce afterwards; the break below the handle line is what draws it.

Where is the inverted cup and handle target?

One hump depth below the handle line at the candle that first closes under it.

What makes an inverted cup and handle Failed?

After the break, a high above the handle’s bounce. Before the break, the same level drops the shape from the chart altogether.

What does Handle depth limit do here?

It caps the handle’s bounce at a percent of the hump depth. At 50 the bounce can reach half the depth; a higher setting accepts taller handles.

Related: Cup and Handle Chart Pattern, Double Top Chart Pattern, Head and Shoulders Chart Pattern, All Chart Patterns, every indicator.