Jeb Handwerger's  Instablog

The cup and handle breakout is a classic pattern which stock market traders search for constantly. A cup and handle pattern means that the stock has made a consolidation where many of the weaker holders sell their shares. Then as the stock breaks into new highs a handle is formed. It is formed because many investors who bought at the previous high are now trying to get back the capital that was initially invested at the previous high. Then a handle is formed. A handle should move sideways or slightly down so investors who bought at the previous high can get back their capital. Once this handle is completed the stock has very little selling pressure and buyers now gain control and push the stock into new highs. Many times the percentage gains are impressive.

Sometimes a stock forms a triangular pennant after a breakout as in the case of U.S. Gold (UXG). These triangular pattern in a handle are bullish and provide investors an opportunity to get in before a major run.

My ideal buy point is after the breakout of the cup when the handle pulls back to key support. Right now is a good opportunity to add shares before a breakout at $4.31.

There are four upcoming events that could make this stock move.

1) 20 drilled hole results from El Gallo in 2 weeks.

2) El Gallo Initial Resource Estimate in 4 weeks.

3)Additional Results From Regional Exploration in 6 weeks.

4)El Gallo Economic Assessment by year end.

I am excited by the results coming out in mid July from the regional exploration. UXG invested a lot into Mexico this year knowing that this land package could contain a massive amount of silver. I am excited for the next few weeks both from a technical and fundamental perspective.

On June 8^th,2010 New Gold (NGD) made a triple top breakout relative to gold and shows great relative strength.  One of the reasons NGD is outperforming even though it has exposure to base metals is that the street is becoming aware of its amazing portfolio of assets, decreasing cash costs and major institutional insiders such as Pierre Lassonde and Seymour Shulich who build Franco Nevada.  These are the type of investors who recognize value and growth both of which NGD has and have put capital into this company.

Today NGD was put on FTSE Gold Mines Index which is an important step in NGD’s growth story as its market cap has improved significantly since our original recommendation at 2.50 last May.  Precious metals are outperforming the general indexes.  When I see breakouts in specific miners relative to gold this is a huge buy signal and believe NGD will move higher.  NGD has the financial strength to withstand a market downturn and it seems that the investment community is becoming aware of NGD’s assets and growth story.