The Gap Higher Bullish-Breakaway Candlestick Trade Setup
Contributed Opinion

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The bullish breakaway trade setup is one of my favorites, but admittedly, it can also be the most challenging trade to execute effectively. Psychologically, it can be challenging to buy a stock that's already gapped-up and traded aggressively higher early in the trading session.

After all, how many times have we seen a stock open higher on some earnings report or brokerage upgrade only to see the news get sold into later in the trading session? Oftentimes, professional traders will have a ‘view' of the earnings news or the analyst upgrade that allows them to position ahead of the catalyst; they then proceed to use the increased liquidity to exit their position and take profits.

However, the best setups maintain their strength throughout the trading day and into the market close. They also tend to experience follow-through buying for several days following the initial Gap Higher Bullish Breakaway Candlestick.

Let's review three recent examples of this trade setup in junior mining, and then we will conclude with a couple of trade setups that are still playing out.

My favorite recent example of this trade setup occurred in early August, following the 3-day "August long" weekend in Canada.

Talon Metals (Daily)

Talon Metals Corp. (TLO:TSX) had suffered a grueling decline between April and July that served to wear down the shareholder base. By early August, TLO was hammering out a bottoming pattern with the ~$5.00 support level holding after multiple tests. On the morning of August 4, Talon delivered a Vault Zone update, and the stock proceeded to 'gap & run' higher.

The best part of this trade setup is that TLO rose another ~35% over the next few weeks, and the stock has more than doubled since the end of July.

NOTE: Gaps that occur after extended weekends/holidays deserve extra attention and carry more weight.

The key ingredients that made the early August Talon setup so potent:

• Investor sentiment was depressed heading into the August 4th news release.

• Support had held after repeated tests—this means the stock had pent-up demand and sellers were exhausted.

• Zooming out to a weekly chart, we can quickly deduce that the summer 2026 retracement was nothing more than a ‘garden-variety' correction.

Talon Metals (Weekly)

• The Talon setup was made even stronger by the number of catalysts the company had lined up, including more drilling news (5-6 drill rigs turning across various projects), continued permitting progress at Tamarack, and a strong cash position.

In junior mining, the final point can't be overemphasized. If Mr. Market knows the company is low on cash and will need to finance in the near-term, it reduces the torque in the stock.

Simply stated, the most bullish setups occur when investor sentiment is sour on a stock, the company delivers a strong positive upside surprise, AND the company is cashed up with no near-term funding needs.

That brings us to Hercules Metals Corp. (BIG:TSXV; BADEF:OTCQB) and the July 30th announcement regarding seven new management additions to Hercules.

During July 2026, sentiment was very sour on Hercules, and the trading in the stock demonstrated the market's total apathy toward BIG.V., but then on July 30th, the news of the addition of the entire Arizona Sonoran Copper management team changed everything.

The market was caught by surprise, and the best part is that BIG.V already had CA$32 million in its treasury.

So there was no need for the company to kill the rally by announcing a private placement.

The stock ran higher on the day of the announcement, but the truly amazing part of this setup was how the rally continued for several weeks. Eventually, BIG.V peaked at $1.62 per share on September 1st—coincidentally, this was the official effective date of the new management team appointments.

For emphasis, let's reiterate the key ingredients that make this setup so powerful:

• Weak investor sentiment heading into the setup.

• Very positive surprise in the form of an unexpected corporate news release (drill result, management change, new major shareholder, permit approval, etc.).

• The company has cash, and there are no near-term funding needs, i.e., the CEO isn't going to stifle the rally by announcing a private placement.

• The rally can have longevity beyond a few trading sessions, depending on the company news flow lineup, and the potential torque of future catalysts (drills turning? pending permit news? etc.)

A couple of other recent examples include San Lorenzo Gold Corp. (SLG:TSXV; SNLGF:OTCQB):

San Lorenzo Gold (Daily)

And Utah porphyry copper-molybdenum explorer BCM Resources Corp. (B:TSX.V; BCMRF:OTCMKTS):

BCM Resources (Daily)

In the recent case of BCM, the ingredients are especially potent due to the fact that not only are assays pending for one hole (TK20), but another hole honing in on the same porphyry target is underway (TK21).

In addition, warrants have been exercised by existing shareholders to ensure the company remains well-funded.

The final stock I'll mention is Nevada Copper-Molybdenum explorer VR Resources Ltd. (VRR:TSXV; VRRCF:OTCQB; 5VR:FSE):

VR Resources (Daily)

VR presented a textbook example of the criteria I set forth above; the news release on August 26, 2026, lit the match. However, the company has ambitious plans for the next phase of drilling at its New Boston Copper-Moly-Tungsten-Silver Project in the Walker Lane. That means it needs another CA$4-$5 million in order to embark upon the next phase of core drilling at New Boston with confidence.

It is the financing question mark that caused the VR rally to run out of steam above $0.50 per share. VRR has been consolidating near $0.40 per share for the last several trading sessions, and Friday afternoon, there were some subtle positive signs of accumulation in the tape.

I expect that VR CEO Michael Gunning will deliver clarity with regard to finances and drilling plans over the next week. It will be this clarity that could serve as the next bullish catalyst.

To be clear, if VR already had CA$5 million in its treasury, I expect the stock would be trading well above $0.70 per share by now. Gunning has the opportunity to deliver a master stroke. Let's see what happens.