WTER Stock: Waiting for the Necessary Signals
I was not kidding when I described the current stock market conditions as turbulent. The wild swings that stocks have been experiencing are on par with a wild roller-coaster ride. The price action in the marijuana stock sector has been no exception, and perhaps has been even wilder.
Ever since marijuana legalization came into effect in Canada, marijuana stocks have been correcting.
Actually, using the word “correction” to describe the price action that followed is putting it lightly. The volatility has led to exceptionally large percentage moves, both up and down. I am sure that these gyrations are beginning to take their toll on investors’ psyches.
In trading environments such as this one, I always recommend getting defensive. This is why I have been going through a number of charts, outlining significant levels of price support that particular stocks need to maintain in order to sustain their bullish trends.
While doing that exercise, I stumbled upon a marijuana stock that has piqued my interest. The company in question is Alkaline Water Company Inc (OTCMKTS:WTER, CVE:WTER). Given its name, it doesn’t sound like a traditional marijuana stock. That’s because it is not. It makes, distributes, and sells bottled alkaline water.
The reason why I consider Water Alkaline stock a marijuana stock is that it has just recently added a new infused beverage division. A few of its products are going to be infused with cannabidiol (CBD). CBD is the non-psychoactive property found in marijuana that is alleged to have many health benefits.
This story is compelling, but I find the stock chart even more intriguing. Yes, WTER stock has corrected with its newfound peers, but, on a relative basis, it has held up pretty well. I am particularly fond of the price action before and after Canada’s legalization.
Alkaline Water stock ran up with the rest of the legal marijuana sector, but the sell-off that followed has been quite constructive. This constructive price action is why I believe that WTER stock is potentially setting up to make a move toward higher prices.
The price action I am referring to is captured on the following stock chart.
Chart courtesy of StockCharts.com
This chart illustrates that, since late September, Alkaline Water stock has been trading within a range.
This trading range is defined by a level of price resistance at $4.60 and a level of price support at $3.10. I believe that these levels need to be watched because the next directional move in WTER stock is likely to occur when it breaks out of this range.
At this moment, I am entertaining the possibility of a bullish breakout above resistance because the technicals are currently aligned in such a manner, suggesting that such an outcome is possible.
There is no need to take my word for it. The technical patterns I am referring to are captured on the following chart.
Chart courtesy of StockCharts.com
The stock chart above focuses on the moving average convergence/divergence (MACD).
MACD is an indicator that is used to determine whether bullish or bearish momentum is pressuring the price action in a stock. I tend to place a lot of emphasis on this indicator because it has proven to be very influential.
In a bullish trend, when the MACD signal lines are in bullish alignment, stocks have a tendency to appreciate. While the MACD signal lines are in bearish alignment, stocks tend to correct. The examples highlighted on the above Alkaline Water stock chart are a testament to this notion.
The signal lines have converged at the zero line, and a bullish MACD signal would suggest that WTER stock is geared toward higher prices. This would also support the idea that the stock might attempt to break out of the range it has been trading in, which would ultimately suggest that higher stock prices are likely to follow.
I am watching the price action on the Alkaline Water stock chart because the price action has been quite constructive.
That is why I believe that WTER stock is positioned to make a move toward higher prices. Only when the required signals are generated will I believe with conviction that higher stock prices are likely to follow.