In technical analysis, the projected price level following a specific chart pattern resembling a cup with a handle represents a potential area of resistance breakout. This projected level is calculated by measuring the depth of the cup-like formation from its peak to its trough and adding that value to the breakout point above the handle’s resistance line. For example, if a stock forms a cup with a depth of $10 and breaks out above the handle’s resistance at $50, the projected level would be $60.
This projected level provides traders and investors with a price objective, offering a potential point of profit-taking or an indicator of the pattern’s validity. The development of such patterns over time has contributed significantly to the toolkit of technical analysts, providing a framework for identifying potential breakouts and managing risk. Understanding the historical context and practical applications can offer valuable insights into market behavior.
