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