In figure 2, the signal is given when prices break the downtrend line formed by the cup's two peaks. Besides those mentioned above, there are several other rules to apply to the pattern. First, the shape and depth of the cup are important. The depth of the cup should be in proportion to the width. Shallower cups do not give the weak bulls enough incentive to get out.
Deeper cups can require the stock to double in price before the buy signal is even completed.
Cups should not be too sharp either. The bottom line is that the cup should look like a cup, not a dish and not a champagne glass. The final indicator to watch is the 200-day moving average. As in other analyses, when a stock gets too far above the average a correction usually follows. Momentum indicators such as rate of change and relative strength index are likely to show overbought conditions at higher percentages.