PRMCF Stock: Completed Pattern Points to Further Gains
The last few weeks have been very fruitful for marijuana stocks. Speculation is once again running rampant, and it is being fueled by the announcement that a major alcohol beverage player, Constellation Brands, Inc. (NYSE: STZ), bought a large stake in Canopy Growth Corp (OTCMKTS: TWMJF, TSE: WEED) stock. This news has sent this sector into a frenzy, which has fueled the advance that has caused many names in this sector to double in a short amount of time.
I am focusing on Cronos Group Inc (OTCMKTS: PRMCF, CVE: MJN) stock because, during this frenzied move towards higher prices, the price action has done a number on the PRMCF stock chart. This number involves the completion of a technical price pattern suggesting that much higher Cronos stock prices are now on the horizon.
The Technical Indications Supporting an Advance
This PRMCF stock chart has been annotated in order to highlight the inverted head and shoulders price pattern that has been in development since February of this year.
Chart courtesy of StockCharts.com
This pattern contains three distinct troughs, where the first and third toughs are of equal size, while the middle trough is the largest. The pattern develops as a result of a significant level of price resistance that prevents the stock price from advancing. In this pattern, this level of resistance is referred to as the neckline.
When the stock price breaks above the neckline, the pattern is complete and higher prices are likely to prevail. The bullish repercussions suggested by this pattern are predicated on the notion that the stock price remains above this level of price resistance and does not trade back below it.
The great thing this pattern is that aside from just suggesting that Cronos stock is set to appreciate, it also provides a potential price objective to trade against.
Obtaining this objective is quite simple, and all that is required is taking the depth of the head and extrapolating that value above the neckline. Applying this method to the price action on the PRMCF stock chart produces a price objective of $4.30, which suggests a further 39.6% upside from current levels.
Wait, There Is More…
The following stock chart illustrates an influential momentum indicator that is reinforcing the view of higher PRMCF stock prices.
Chart courtesy of StockCharts.com
The focus of this price chart is the moving average convergence/divergence (MACD) indicator located in the lower panel.
MACD is a momentum indicator that uses the crossing of a signal line in order to determine whether bullish or bearish momentum is influencing the trading action in an investment. This is a very influential indicator because, in order for a stock to stage a sustained move towards higher prices, bullish momentum is a necessity.
A bullish cross was generated in August, suggesting that bullish momentum was influencing the trading action in PRMCF stock, which is paving the way towards higher stock prices. Since this indication was generated, higher prices have prevailed, illustrating that this is one indicator not to trade against. I will assume that as long as the MACD indicator remains in bullish alignment, higher Cronos stock price will prevail.
I Am Not Done Yet…
All these factors I have focused on suggest that further gains are a real possibility, but what I have left out is that the current surge in price has also caused the stock price to create a new all-time high.
All-time highs are very bullish indications, especially when they create a new long-standing high. In this case, the previous all-time high was created in March of this year, and it is the exact same level that defined the significant level of price resistance responsible for painting the inverse head and shoulders pattern on the PRMCF stock chart.
Breaking above a long-standing all-time high creates a dynamic where all the bulls are sitting pretty with gains, while all the bears are sweating with losses. If the trend towards higher price continues, it puts more pressure on the bears to buy back the stock, covering their losing position. Add the notion that momentum traders are currently chasing performance, and it creates the perfect environment for a substantial run towards higher Cronos stock prices.
Some of the best-performing investments this year carry this exact characteristic, and it is why I am eager to see that what future brings for Cronos stock.
The frenzy surrounding marijuana stocks has caused Cronos stock to complete a technical price pattern that is suggesting that higher prices are on the horizon. This pattern is being reinforced by an influential momentum indicator, and with no overhead resistance in sight, I believe that the future for PRMCF stock is bright.