Gold stocks have rallied significantly in 2020 and many are close to forming the key pattern Cup and Handle technical chart formation to suggest more gains to come.
Below is a list of gold and gold miners’ stocks and their performances in the year 2020.
Cup & Handle Patterns
The Cup and Handle Chart pattern was developed and popularized by William J. O’Neil in the 1980s through his CANSLIM methodology, published in Investor’s Business Daily newspaper and his book "How to Make Money in Stocks."
Cup and Handle pattern resembles a cup with a handle and are continuation patterns that they usually form in bullish trends. Most Cup and Handle patterns are very reliable and offer great trading opportunities. They also form in all markets and in all time-frames. The “Cup” formation is developed as consolidation phase during price rallies from the round bottom formation over multiple weeks to months. The “Handle” part forms due to a price correction after cup formation and before a clear breakout to the upside.
Cup and Handle Pattern structure show the momentum pause after reaching a new high in a U-Shape form, followed by another attempt to breakout. When this breakout from the rim of the cup fails it starts to fall back to build the handle structure. Usually, the handle structures are small, and the handle depth should not exceed more than 50% of cup depth. This handle part of the pattern generates interest in buyers as they expect the pattern to breakout from these levels. The pattern is valid only if price convincingly breaks out with increased volume above the rim of the cup levels (see chart).
Gold Miners Cup & Handle Pattern
The chart shows below shows the Gold Miners ETF (GDX) daily chart with a Cup and Handle pattern formed from March 2020 to April 2020 and trading above breakout level $31.84. Cup and Handle Patterns are valid only when price closes above the breakout level. GDX breakout level: $31.84, cup-mid level as stop level ($24.01) and targets $41.52 to $44.15, $47.5.
Yamana Gold
The following chart shows Yamana Gold's (AUY) Cup & Handle Pattern. AUY currently formed the cup part of the pattern but did not complete the pattern formation. AUY's breakout level $4.94. Cup and Handles are valid only when price closes above the breakout level. After handle formation, if prices close above the breakout level, a long trade may be entered with mid-level as stop level ($4.0) and targets $6, $6.51-$7.07 (see chart).
Royal Gold
The following chart shows Royal Gold (RGLD) Cup and Handle pattern formation from September 2019 to May 2020. RGLD currently formed the cup part of the pattern and yet to complete full pattern formation. RGLD's breakout level $128.78. Cup and Handel Patterns are valid only when price closes above the breakout level. After handle formation, if prices close above breakout level, a long trade may be entered with mid-level cup as stop level ($99.28) and targets $169, $187-200.
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