Graphical model with the interesting name "cup with handle" pattern is bullish, testifying to the continuation of the dominant trend. The model is developed trader have ilyamom O'Neal and first described in the author's book "How to make money in stocks" was published in 1988.
According to the description, there are two parts of the figure - a cup and handle. Formation of the first part is after the increase of the currency and is shaped like a half circle. When the formation of the first part of the pattern is completed, the charts continues to move in the right part of the figure. Thus, in the frame there is the second part - the pen. If the schedule breaks for the trading range of the figure, it is assumed that the preceding bull trend will continue.
The above graphic model can rightfully be considered a continuation only if the prior trend. Optimal in this case is a clear dominant bull trend, not having too mature. Mature trend leaves much less likely to "cup with handle" to confirm the continuation - the potential opportunity to further advance up to a minimum.
To qualify for the cup should be strictly U-shaped base in form rather resembles a ball or circle. V-shaped base to qualify as a reversal is not recommended. Model «U» is a community of traders reliable confirmation of the ongoing consolidation with a strong level of support is not far away from its base. Such a figure in its classic form is equivalent highs on both sides, but the correct pattern is formed is not always.
The optimal depth of the cup is 30% or less of the size of the previous expansion. In the all too frequent corrections, this value can be increased to 50%, and in some cases reach up to levels of 60% or more (Dow Theory).
In most cases, after the maximum, formed on the right side of the main figures of the case of rollback, which forms the second part - the handle. In some cases, it may resemble a flag or pennant , which has a characteristic downward slope, in other situations can be observed only a short pullback.
The handle is a kind of completion of the consolidation process, before major breakthrough. In this situation it is usually reduced to 1/3 cup increase. The small size gives the model a brilliant recovery "bull" color and usually prevents significant breakthrough.
Formation on the daily chart of the figure takes up to 6 months, and its continuation - handles about 1-4 weeks. Predict the future improvement can be measured by the distance from the top of the right cup to its base.