1. A cup and handle formation should follow a trend increase, ideally one that is a few months old;
2. The cup must always precede the handle. The cup must form a rounded bowl shape, with a clear bottom;
3. The cup must last between 1 to 6 months, and the handle between 1 to 4 weeks;
4. The stock’s volume should decrease together with the price during the cup. The volume should increase fast near the end of the handle (when prices begin to rise).
5. The cup and handle is a bullish chart pattern that is defined by a chart where a stock drops in value, then rises back up to the original value, then drops a small amount in value, and then rises a small amount in value. It is considered to be a bullish signal. It is usually followed by a sharp rise in value.