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1998issue C101-6

Cup-with-handle construction rules

The cup-with-handle is written here as sequential price points, a handle-depth-limit, volume-price confirmation, and a watchlist-only pivot breakout.

  • Build the cup-with-handle from sequential points K, A, B, C, and D, and treat C as the pivot-point that a later close at E must exceed.
  • Keep the shape screenable with PK < PA, PB < PA, PC <= PA, PB < PC, and PD <= PC, plus a handle-depth-limit that holds D above the 80% mark of the B-to-C range.
  • Require volume-price analysis: expanding volume on the right-cup rise, diminishing volume on the handle, and breakout volume at least 50% above the prior 50-day average.
  • Use the screen as a watchlist, not a buy list, because many completed constructions never break the pivot and can roll into a failed right shoulder.
Entries in this reading3 entries
Current trackPivot point45 readingsVolume-price analysis129 readingsBreakout confirmation172 readings

A cup-with-handle as named price points

A cup-with-handle is a rounded decline-and-recovery plus a lighter-volume pullback used as a pre-breakout construction. In the historical workflow it is built as a peak, a decline into a base, a rise back toward that peak, then a lighter pullback whose right-cup high is the pivot price.

A complete construction can be labeled with five sequential price points K, A, B, C, and D, plus a later breakout point E above C. The pivot-point is the right-cup peak C. It defines the buy or breakout price a later close must exceed.

Idealized cup-with-handle with named turning points

Read the cup as the climb from the setup at K to the left lip A, the base into B, and the right lip C; the handle is the pullback to D, and E is the breakout through C. Values were digitized from the article’s idealized Figure 1 price line on the printed 0–10 scale versus day count, not from a live ticker.
Read the cup as the climb from the setup at K to the left lip A, the base into B, and the right lip C; the handle is the pullback to D, and E is the breakout through C. Values were digitized from the article’s idealized Figure 1 price line on the printed 0–10 scale versus day count, not from a live ticker.34-day schematic window

The source presents this as a highly idealized price-volume schematic, not a live stock. Volume bars share the same 0–10 pane and were not digitized. Point labels K, A, B, C, D and E follow the article’s naming.

Price inequalities that encode the shape

The price inequalities PK < PA, PB < PA, PC <= PA, PB < PC, and PD <= PC encode the cup-and-handle geometry for screening.

TradersWeek editorial: those named points and inequalities are how the freehand cup-with-handle becomes a computer-checkable construction a screen can accept or reject.

A handle-depth-limit on the last print

To reject handles that have fallen too far, the last handle print D must remain above the 80% mark of the range between the cup bottom B and the pivot C. That handle-depth-limit is the rule that the last handle print stay above a stated fraction of the cup-bottom-to-pivot range.

Volume-price analysis around the pivot

Price structure alone is treated as insufficient. The construction also requires expanding volume on the right-cup rise and diminishing volume on the handle decline. Volume-price analysis compares up-day and down-day volume across the right cup and handle to test whether demand is expanding into the pivot.

A breakout is a move above the pivot on volume large enough to confirm the setup rather than merely complete the shape. One stated breakout-volume test is that volume on the move through the pivot should be at least 50% above the prior 50-day average volume.

A watchlist, not a buy list

A computerized screen is framed as a watchlist filter, not a buy list, because many completed constructions never break the pivot and can instead roll into a failed right shoulder. A watchlist-not-buy-list candidate still requires a later pivot break and volume confirmation before any action.

When a later high resets the pivot

If a later high resets the right-cup peak, the pivot price is updated to that new high and the breakout test is applied to the revised level.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
8 of 38 in the Pivot point track
20001-5 pp.Next on Pivot pointPivot levels as a daily trade hypothesisA next-session Pivot point is the three-value average of the prior high, low, and close; first support and first resistance are that pivot reflected against the prior high and low.
All readings on this track · 38 readings
  1. 1988Constructing action-reaction lines from two pivots
  2. 1988Constructing intradaily point-and-figure boxes and pivot ladders
  3. 1991Constructing layered support and resistance from swings, pivots, and retracements
  4. 1994Three locks on a day-session order, then a staged exit
  5. 1994Building a five-level daily pivot grid
  6. 1996Constructing daily pivot points from session prices
  7. 1996Higher time frame balance points as a trend and band filter
  8. 1998Cup-with-handle construction rules
  9. 2000Pivot levels as a daily trade hypothesis
  10. 2001Construct a same-session polarity card around the daily pivot
  11. 2001Trading inside the cup-with-handle before the breakout
  12. 2005A lower-low rebound as one entry, abstention, and stop routine
  13. 2006Constructing session pivot maps from the prior high, low, and close
  14. 2006Constructing a pivot grid for stops and buy-stops
  15. 2006Monoparametric automatic trendline construction
  16. 2008Write the exit before the entry
  17. 2010Dynamic-pivot range grids for trend bias
  18. 2010Reverse-entry exits for pairs, pivots and support
  19. 2011Sequencing pairs, futures pivots, and implied volatility
  20. 2013Constructing Camarilla levels from prior range
  21. 2013Camarilla levels as a multi-timeframe map of reversion and breakout
  22. 2013Constructing a camarilla-grid from a completed lookback range
  23. 2013Constructing daily pivot support and resistance rungs
  24. 2014Constructing daily pivot levels from prior-session OHLC
  25. 2014Next-session pivot support and resistance from daily bars
  26. 2014Constructing session pivot rails from the prior-day range
  27. 2014Evaluating moving-average, pivot, and support-resistance filters
  28. 2016Stage a Trailing stop toward a planned target
  29. 2016Smoothed RSI and full-cut pivots for option-income exits
  30. 2017Constructing a weekly seasonality pivot scaffold
  31. 2017Seasonality and pivot points as scenario maps, not forecasts
  32. 2018Wave pivots, strength filters, and option premium
  33. 2018Constructing Fibonacci and daily pivot support maps
  34. 2018Building a daily pivot lattice with Fibonacci rails
  35. 2019Prior-session pivot channels for same-day entries
  36. 2019Constructing intraday pivot channels from prior-session levels
  37. 2020Variable-strength pivot highs as falsifiable entry filters
  38. 2020A high-volume-pivot long after a multi-week decline
By fieldChart patterns222 readingsBy year199853 readings
All 45 readings tagged Pivot point
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