Generally, a digital asset must have had a powerful uptrend of at least 30% and during some 2 to 4 months, before it then goes through this minor correction – the Cup with Handle. The asset will sell off into the correction in a downward fashion for maybe 15 to 35 percent off the old high point. The time factor for the development of the Cup is generally anywhere from 7 to 12 weeks depending on the overall market condition.
As the asset comes up to test the old highs, the asset will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the price drift in a sideways fashion with a bias to the downside for about 5 days to 3 weeks. This part of the pattern forms in the top half of the Cup (base) and is called the Handle.
The correction depth in the Handle is generally not more than 15%. A handle that is any lower is generally of a defective asset and contains higher risk for failure. Volume should dry up a bit, that is individual investors (bears, sellers) are getting out but not necessarily institutional investors (which would make volume spike). That will make it easier for a resistance breakout to occur.
The time to buy the digital asset is as it emerges into new highs during the potential breakout and above the old high point set with the right top of the Cup (high point of the Handle). Volume should surge by 50% during breakout, testifying that big investors fueling the move.
The Cup with Handle pattern is one of the best and most reliable formations to look for. However, it is important to note that this formation works more reliable at the beginning of an overall market’s fresh bull run (after a major correction has ended), and not at the end of a major market advance.
One can see the Cup with Handle pattern on a weekly chart, and perhaps more clearly on a daily chart. On a daily candlestick chart, a shorter moving average can also be helpful to identify this pattern.