Here is this month’s selection of Traders’ Tips, contributed
by various developers of technical analysis software to help
readers more easily implement some of the strategies presented.
Internet users will also find these and some previous
Traders’ Tips on our home page at http://www.traders.com.
TRADESTATION / SUPERCHARTS
Our focus this month in Traders’ Tips is on the cup-with-handle
chart pattern that Rick Martinelli and Barry Hyman
explored in the October 1998 STOCKS & COMMODITIES in
“Cup-with-handle and the computerized approach.” When
all the criteria fall into place, this chart pattern really seems
to pick out some nice bullish breakouts. I must caution you,
though, that as with most chart patterns, the cup-with-handle
formation is subjective. In other words, the pattern defined
for the computer program may not recognize some legitimate
cup-with-handle formations or may display a pattern where
one does not truly exist. Thus, in setting up the EasyLanguage
indicator below, I have tried to strike a balance between the
The name of the EasyLanguage indicator described here is
“cup & handle.” When the indicator identifies a cup-with-handle
formation, it will place the following characters on the
chart for identification of the key points:
K: Beginning of the setup phase
LS: Left-hand side of the cup formation
RS: Right-hand side of the cup formation
B: Bottom of the cup.
Once the key points have been identified, the indicator will
also plot a horizontal line at the level of the right-hand side of
the cup. The horizontal line will continue to plot until either
the upward price breakout occurs or the close falls below the
acceptable level. If an upward price breakout occurs, a red dot
will be plotted at the close (Figure 1).
This indicator will generate an alert for two situations. The
first is when a valid cup-with-handle formation has been
identified. The second is when a price breakout above the
right-hand side of the cup formation has occurred. “AlrtLen,”
the only input for this indicator, determines the number of
bars after the occurrence of either of the two above criteria
that an alert will be generated.
To create the cup-with-handle indicator, you can use the
following EasyLanguage code: