CMED Stock: The Marijuana Stock Sector is on Fire
2017 ended on a high note as marijuana stocks put in incredible advances at year-end, which bodes well for 2018.
I am focusing on CanniMed Therapeutics Inc (OTCMKTS:CMMDF, TSE:CMED) because it is marijuana stock, and it is benefiting from this sector-wide move, as a rising tide is lifting all boats.
Even though this may seem like an attractive investment thesis, the reason why I like CanniMed stock at this juncture is that the indications on the stock chart suggest that further gains are on the horizon.
For those who haven’t frequented my work, I analyze price charts in order to gain a view on whether an investment is set to appreciate or depreciate. This method of investment analysis is called “technical analysis,” and it is predicated on the notion that stocks trend, and that historical data points can be used to forecast what the future may bring.
The following stock chart is why I believe that higher CMED stock prices are on the horizon.
Chart courtesy of StockCharts.com
This price chart illustrates that, since the middle of November 2017, this stock has been painting a consolidation triangle.
Triangle patterns are identified by their price action, which is characterized by a sequence containing a series of lower highs and higher lows. In order to capture this pattern, I used two converging trend lines that were created by connecting the respective levels of lower highs and higher lows.
Consolidation patterns mark midpoints in a trend. They are very special patterns because the confinement of space created by the converging levels of support and resistance gives them the ability to build and store energy within them. This stored energy is finally released when the patterns are resolved, which is stipulated by breaking above resistance or falling below support.
On December 27, 2017, CanniMed stock completed the consolidation triangle by breaking above resistance, and higher prices have prevailed. The day following the breakout, CMED stock appreciated to the tune of 9.88%, illustrating what can be expected to occur once a triangle pattern is resolved.
The bullish implications suggested by the consolidation pattern are being reinforced by the moving average convergence/divergence (MACD) indicator, located in the lower panel.
MACD is a momentum indicator that distinguishes between bullish and bearish momentum using the crossing of a signal line. This information is pertinent because, in order to sustain a move toward higher or lower prices, the applicable momentum is required.
On December 29, a bullish MACD cross was generated on the CMED stock chart. This indication is suggesting that bullish momentum is influencing the price action in CanniMed stock, which is creating a path of least resistance that is geared toward higher stock prices.
These indications that I have outlined suggest that higher prices are on the horizon, but, if I take into account that the consolidation triangle acts as a midpoint, I can create a potential price object for the move that is currently in development. The following stock chart will help illustrate this:
Chart courtesy of StockCharts.com
This stock chart illustrates that CanniMed stock hit a low of $8.59 in September 2017 and ran to a high of $21.90 in November, right before the consolidation triangle began its development. The length of this move was $13.31.
The consolidation triangle acts as a midpoint. Therefore, if I take the length of the move that I outlined and I extrapolate that value from the base of the triangle, it creates a potential price objective of $31.00.
This view suggesting that $31.00 is a potential price objective is predicated on the notion that CanniMed does not close below $17.79, which was the base of the consolidation triangle.
I am bullish on CanniMed stock because a number of technical indications on the CMED stock chart support the notion that higher stock prices are on the horizon. I will maintain this bullish view as long as the indications that created it remain in bullish alignment.