SUI has broken out from a cup and handle formation.This is SUI on the daily candle chart. It has broken out of a cup and handle chart.
Cup. The cup should be U-shaped and resemble a bowl or rounding bottom. A V-shaped bottom would be considered too sharp of a reversal to qualify. The softer “U” shape ensures that the cup is a consolidation pattern with valid support at the bottom of the “U.” The perfect pattern would have equal highs on both sides, but this is not always the case.
Cup Depth. Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. However, the retracement could range from 1/3 to 1/2 with volatile markets and over-reactions. In extreme situations, the maximum retracement could be 2/3, which conforms with Dow Theory
Handle. After the high forms on the cup's right side, a pullback forms the handle. Sometimes, this handle resembles a flag or pennant that slopes downward; other times, it's just a short pullback. The handle represents the final consolidation/pullback before the big breakout and can retrace up to 1/3 of the cup's advance, but usually not more. The smaller the retracement, the more bullish the formation and the more significant the breakout. Sometimes, it's prudent to wait for a break above the resistance line established by the highs of the cup.
Duration. The cup can last from one to six months, sometimes longer on weekly charts. The handle can last from one week to many weeks and is ideally completed within one to four weeks.
Volume. There should be a substantial increase in volume on the breakout above the handle's resistance.
Target. The projected advance after breakout can be estimated by measuring the distance from the right peak of the cup to the bottom of the cup.
