The development potential of the “Cup with Handle” figure itself is from + 20% to + 111%.
+ 20% - until the resistance of the "cup", if we do not break through, then the formation is not confirmed.
+ 48% - previous local high
+ 111% - full development of the figure’s potential, as in a book.
Stop loss - under the red zone. The lower boundary of the global horizontal channel.
The "Cup with handle" ("Mug") figure is a figure of the continuation of the trend. It is very reminiscent of the Saucer reversal pattern, but without the handle. One of the main features of this figure is that it is a continuation figure precisely on an uptrend. There is also a variant of this figure in mirror image on a downtrend: "Inverted cup with a handle."
The name of the figure was due to the external similarity with the shape of the cup.
The "Cup with handle" figure (Mug) consists of two parts:
The stages of the formation of the figure and the Take Profit
1) The very first condition for the formation of this figure model is an uptrend. How is it a pattern of continuing the uptrend. Ideally, the trend should be strong enough and long enough, but not too "old". Otherwise, the potential for further growth and confirmation of the figure is sharply reduced.
2) "Bowl" - should have a smooth concave bottom. In an ideal "Cup with a handle" ("Mug"), the maximums of the glass (edges on the sides) will be at the same level (general resistance), but this is not a requirement. But, the more "ideal" the form of the "Bowl", the stronger the signal. More rounded shape of the figure "guarantee" a fairly good consolidation and is a more reliable sign with strong levels of .
3) After the formation of the "Bowl", the second obligatory component of the figure is formed - this is the "handle". After the maximum is formed on the right side of the "Cup", a small rollback occurs, which is formed to the right of it and which forms the "Handle". It may look different and take different shapes and shapes: flag, , triangle ... Also, these shapes meet with the “Pen” without tilt, but with horizontal movement. Usually, the handle in height does not occupy more than 1/3 of the height of the glass.
It is believed that the smaller the “handle”, the stronger the breakthrough and further movement will be. The edges of the handle are approximately flush with the edges of the glass, which once again confirms the resistance of the figure. "handle" is the last step before the final formation of the figure and the subsequent breakthrough of resistance. The breakout level of the figure is located at the level of the edges of the "cup" or slightly lower if the "Handle" is tilted down (at the level of resistance of the "Handle").
4) The timeframe is of great importance. The longer the formation takes, the more reliable the signal is considered. The larger the time frame, the more reliable the signal.
5) As a rule, at the bottom of the "Cup" the volumes have a minimum value. Then, the indicators during the formation of the second part of the "Cup" should gradually increase. On the rollback, prices during the formation of the "Handle" should go down. At the breakout of the resistance of the "Handle" have a maximum value. When the resistance of the figure breaks through.
6) The goal of working out the figure is the distance between the minimum and maximum of the figure (resistance). Overlaid is the distance from the resistance breakout zone. But when setting goals, you need to consider global and local levels. They greatly depend on how the goals in the figure work out.
If the resistance of this figure cannot be overcome, then the price will flat in the range between the resistance and the bottom of the channel.
fixing prices above resistance "Cups with a handle" means strong growth. The "cup-and-handle" figure will fulfill its trading target
+ 18% from the second entry point (breaking through the cup resistance)
A local uptrend within this channel has broken through, thereby confirming the formation of the “Inverted Dragon” figure.
Short targets and at the same time points for observing a price reversal:
1) Hump level.
2) The support level of the local and global horizontal channel (very strong level).
3) Head Level (at the same time minimum price).
The local horizontal channel has a step of 44%.
The global horizontal channel has a step of 160%
I showed entry points on the chart.
The trading potential in the local channel is from +30 to + 40%. Also, if the price breaks through and fixes above the channel resistance line, the local growth potential is still the height of the previous channel by + 40%, the next strong resistance is at this level.
You can also enter at the head level of the inverted dragon when confirming support. It is unlikely that the price will fall to this level, but you need to be prepared for those things that seem unlikely.
It all depends on the breakthrough / retention of those zones that I showed on the chart.