cup-and-handle

name	cup-and-handle
description	Define and test cup-and-handle breakout shapes. Use when measuring a rounded base, handle depth, lip break, retest, invalidation, and measured-move hypothesis without inferring accumulation.
license	Apache-2.0
metadata	{"author":"ske-labs","version":"4.0"}

Cup and Handle Pattern

A conventionally bullish continuation shape. Treat its geometry, breakout direction, and measured move as testable hypotheses rather than evidence of accumulation.

Pattern Structure

The Cup

• Price rounds down from resistance, forms a "U" shaped bottom (not "V"), rises back to resistance
• Duration and symmetry are market- and timeframe-specific; define minimum and maximum bars before scanning

The Handle

• Small pullback from resistance into a declining flag/pennant
• Define handle depth as (lip - handle_low) / (lip - cup_low) and reject only at a pretested threshold
• Require the handle to remain above the cup midpoint only if that rule is part of the frozen specification

Factor	Preferred seed definition	Alternative to test
Cup shape	Rounded "U"	Slightly V-shaped
Handle depth	Shallow relative to cup	Predeclare a tested maximum
Volume	Decreasing in handle	Stable

Workflow

1. Get Exact Data

get_candles_around_date(symbol=<symbol>, exchange=<exchange>, interval=<interval>, date=<cup_bottom_date>)

2. Mark Key Structure

Cup lip (resistance level where both sides of the cup meet):

draw_chart_analysis(action="create", drawing={
    "type": "resistance",
    "points": [
        {"time": <left_lip_time>, "price": <lip_price>},
        {"time": <right_lip_time>, "price": <lip_price>}
    ],
    "options": {"text": "Lip"}
})

Cup bottom:

draw_chart_analysis(action="create", drawing={
    "type": "highlight",
    "points": [{"time": <bottom_time>, "price": <bottom_price>}],
    "options": {"text": "Cup Low"}
})

Handle boundaries (2 converging or parallel trend lines):

draw_chart_analysis(action="create", drawing={
    "type": "trend",
    "points": [
        {"time": <handle_high1_time>, "price": <handle_high1>},
        {"time": <handle_high2_time>, "price": <handle_high2>}
    ],
    "options": {"text": "Handle R"}
})

draw_chart_analysis(action="create", drawing={
    "type": "trend",
    "points": [
        {"time": <handle_low1_time>, "price": <handle_low1>},
        {"time": <handle_low2_time>, "price": <handle_low2>}
    ],
    "options": {"text": "Handle S"}
})

3. Enter

Standard: Enter on break above cup lip with volume spike. Stop below handle low. Aggressive: Enter as handle finds support. Tighter stop, higher risk. Conservative: Wait for breakout + retest of lip (now support). Target: Breakout level + cup depth (lip to bottom distance).

Evidence and Validation

• Treat the setup as a testable hypothesis, not a prediction. Define thresholds, entry, invalidation, and exit before evaluating outcomes.
• Calibrate on the same instrument, venue, session, and timeframe. Use closed candles and a held-out or walk-forward sample; record every variant tried.
• Include spread, fees, slippage, borrow or funding, partial fills, and latency. Reject the setup when net expectancy is not positive or depends on one narrow parameter.
• Return observed inputs, missing data, cost assumptions, entry, invalidation, exit, and a valid, watch, or no-trade status.
• Research basis: Lo, Mamaysky & Wang supports testing objectively defined chart patterns, not assuming that a named shape has a universal measured-move edge.

Key Rules

• NEVER enter before the handle forms — cup alone is incomplete
• Treat a break below the cup midpoint as structural invalidation only when the chosen specification says so
• Measure relative volume during the handle and breakout; do not require an untested universal multiple
• Failure at lip on second attempt = potential double top, not cup and handle

Related Skills

• flag-pennant — The handle is essentially a small flag
• double-top-bottom — Failed cup breakouts can become double tops