Before You Begin: Know the Basics

This system assumes you know how to read charts and navigate a trading platform.

If you’re unfamiliar with:

  • What a candlestick is

  • How to draw a moving average

  • What a volume breakout looks like

  • How to use TradingView

Start here:
What Is the Stock Market and How Does It Work?
Stock market basics: 10 tips for beginners

You don’t need years of experience—just clarity, discipline, and willingness to learn.

PART 1: Cup & Handle Pattern – Qualifying a Setup

Pattern Qualification Checklist

Use this to determine if a stock meets the technical requirements for a valid cup and handle setup:

Pattern & Structure

  • Is current price trading above the 50-day SMA?
    This signals a bullish trend context.

  • Cup has at least 12 weekly candles?
    Shallow cups are weaker. Depth of time is strength.

  • Handle is relatively tight and short? (1–5 weeks)

Technical Confirmation

  • Upper channel line drawn?
    [Click here to learn how to draw it]

  • Fibonacci applied correctly?

    • A: Cup base low

    • B: Cup rim high

    • C: Pullback low (or breakout candle low if no pullback)

  • Did the weekly candle after breakout close above the 0.236 Fib level?
    This is your psychological and technical threshold.

Price Action Discipline

  • Is the correction no more than 10–15% from the handle rim?
    This keeps the setup tight. Price action must stay above the halfway point of the cup.

  • Does the handle sit in the upper half of the cup’s depth?
    This shows buyers are still in control.

  • Breakout occurred with strong volume?
    A valid breakout isn’t stealth—it’s decisive.

  • Is volume on the breakout candle above the 10-week moving average of volume?

Decision-Making Notes

This is where judgment meets discipline.

  • If price breaks the 0.236 Fib level during breakout, I consider scaling in, with stop-loss logic below this level (covered in Part 4).

  • This isn’t mechanical—you must assess your tolerance for volatility, context of the market, and the cleanness of the setup.