How to grasp the mid-term buying point of 4-hour volume breaking through the previous high + daily line forming a cup handle pattern?

The cup handle pattern, confirmed by a 4-hour volume breakout, signals strong bullish momentum for optimal mid-term crypto entries when daily and volume conditions align.

Jul 27, 2025 at 12:00 pm

Understanding the Cup Handle Pattern in Daily Charts

The cup handle pattern is a bullish continuation formation commonly observed in daily candlestick charts within the cryptocurrency market. It consists of two primary components: the cup and the handle. The cup forms when the price drops gradually, reaches a bottom, and then climbs back to approximately the starting level, creating a rounded "U" shape rather than a sharp "V". This rounded bottom indicates a period of consolidation and healthy digestion of selling pressure. Following the cup, the handle develops as a smaller pullback, typically forming a slight downward drift or a tight consolidation channel, often resembling a flag or a small wedge. The completion of the pattern occurs when the price breaks out above the resistance level established at the right rim of the cup. This breakout is considered a strong signal of upward momentum, especially when confirmed by increasing volume.

Role of 4-Hour Volume Breakout in Confirming Momentum

While the daily cup handle pattern provides a broader structural signal, the 4-hour volume breakout serves as a critical timing confirmation for mid-term entries. Traders should monitor the 4-hour chart closely as the price approaches the breakout zone of the cup’s right rim. A valid breakout is not just about price surpassing a resistance level—it must be supported by significantly higher volume compared to the preceding candles. This volume surge indicates strong buying interest and reduces the likelihood of a false breakout. Specifically, the volume on the breakout candle should exceed the average volume of the last 10 to 15 candles on the 4-hour timeframe. When the volume breaks through the previous high volume level during this breakout phase, it confirms that institutional or large-scale participants are entering the market, reinforcing the strength of the move.

Identifying the Optimal Mid-Term Entry Point

To pinpoint the ideal buying moment, traders should wait for the confluence of both the daily cup handle completion and the 4-hour volume surge. The entry should not be taken prematurely during the handle formation or before the volume confirms the breakout. Instead, the following conditions must align:

• The daily candle closes above the cup’s resistance level, confirming pattern completion.
• On the 4-hour chart, a candle closes above the breakout level with volume exceeding the prior high volume peak in the recent 4-hour sequence.
• The breakout candle should preferably close near its high, showing strong bullish control.
• The Relative Strength Index (RSI) on the 4-hour chart should be above 50 and ideally rising, avoiding overbought extremes (above 70) to prevent exhaustion.
  

  Once these conditions are met, the entry can be placed at the close of the confirming 4-hour candle or on the open of the next candle to ensure execution.

  Setting Stop-Loss and Managing Risk

  
  Risk management is essential when trading based on chart patterns. After entering the position, the stop-loss should be placed below the lowest point of the handle or slightly below the breakout level to account for market noise. For example:
• Identify the lowest candlewick within the handle formation on the daily chart.
• Set the stop-loss approximately 2% to 3% below this level to avoid being stopped out by minor volatility.
• Alternatively, if the breakout level is clearly defined, place the stop-loss just below the 4-hour candle’s low that initiated the volume surge.
  Position size should be adjusted so that the potential loss does not exceed 1% to 2% of the total trading capital. This ensures long-term sustainability even if the trade fails.
  

  Using Additional Indicators for Confirmation

  
  While the cup handle and volume breakout are strong signals on their own, incorporating additional technical tools enhances reliability. The 20-period Exponential Moving Average (EMA) on the 4-hour chart can act as dynamic support during the breakout phase. If the price pulls back after the breakout and finds support at the rising 20 EMA, it reinforces bullish sentiment. The MACD indicator on the 4-hour timeframe should show the signal line crossing above the zero line or the histogram expanding in positive territory, indicating accelerating momentum. Additionally, monitoring on-chain metrics such as exchange netflow (via Glassnode or CryptoQuant) can provide context—decreasing exchange reserves during the breakout suggest accumulation, supporting the technical signal.
  

  Practical Example: Applying the Strategy on a Cryptocurrency Pair

  
  Suppose Bitcoin (BTC/USDT) has been forming a cup handle pattern on the daily chart over the past six weeks. The cup bottomed at $58,000, and the right rim resistance is at $68,000. The handle formed between $65,000 and $67,500 over 10 days. On the 4-hour chart, price approaches $68,000 again. Traders monitor volume levels:
• The previous highest 4-hour volume candle recorded 2,500 BTC traded.
• A breakout candle forms at $68,200 with 3,100 BTC volume, closing near its high.
• Daily candle confirms close above $68,000.
  This confluence triggers the entry. The stop-loss is set at $64,800 (below the handle low), and the position is scaled in using limit orders to avoid slippage.
  

  Frequently Asked Questions

  
  What if the volume breaks the previous high but the daily candle doesn’t close above the cup resistance?
  This scenario suggests a premature move. Without a confirmed daily close above resistance, the pattern remains incomplete. Wait for the next daily candle. If it closes above, reassess volume on the 4-hour. If volume fades, the breakout may lack sustainability.
  

  Can the cup handle pattern occur in bear markets?
  
  Yes, but its reliability decreases. In strong downtrends, cup handles often fail. Confirm the broader trend using the 200-day moving average. If price is below it, treat the pattern as lower probability unless volume and momentum indicators strongly support it.

  How long should the handle last for the pattern to be valid?
  
  The handle typically lasts from 1 to 4 weeks on the daily chart, which translates to 6–48 candles on the 4-hour timeframe. A handle shorter than 3 days may be too brief to represent proper consolidation, while one longer than 6 weeks risks losing its pattern integrity.

  Is it necessary for the cup to be perfectly rounded?
  
  No. While a smooth "U" shape is ideal, minor wicks or small spikes are acceptable. The key is that the decline and recovery show gradual price discovery without sharp panic selling. Focus on the overall symmetry and volume profile rather than geometric perfection.