ACBFF Stock: Price Objective Obtained
Marijuana stocks went from being one of the hottest sectors, by registering very impressive daily gains, to one of the coldest, as a correction has gripped this entire sector. The losses are substantial and they are beginning to add up; I have reason to believe that a larger correction is now in the works.
I am focusing on Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) stock because, if you had been following my previous publications on this stock, the correction that has gripped ACBFF stock should come as no surprise because it commenced right after my price objective of $10.00-$12.00 was met.
I first laid out this price objective on November 7, 2017, in a report titled “Aurora Cannabis Breaks Out, Setting the Stage for a Move Toward $10.” This objective was created using a method of investment analysis called technical analysis.
Technical analysis is based on the notion that historical price and volume data can be used to speculate on what the future may bring. Many may shun this style of investment analysis, but I can attest that, when it is applied correctly, the results are simply too good to dismiss. It is why I have spent the last two decades studying and applying this method.
The $10.00-$12.00 Price Objective
The following Aurora Cannabis stock chart illustrates the price action from where I derived the $10.00–12.00 price objective.
Chart courtesy of StockCharts.com
This ACBFF stock chart has been annotated in order to highlight the wave structure responsible for creating constructive price action.
Constructive price action consists of impulse waves and consolidation waves, which work in alternation to create and sustain a trend.
The wave highlighted in green is an impulse wave, and these waves are advancing in nature. Impulse waves capture the stage in a bullish trend when the stock price stages a sustained move toward higher prices. Investors and traders alike aim to capture this wave.
The wave highlighted in purple is a consolidation wave and these waves are corrective in nature. Consolidation waves capture the stage in a bullish trend when the stock price refrains from advancing and makes a price correction instead.
Price corrections are a necessary part of a bullish trend because they serve to unwind any overbought conditions that were created in the preceding impulse wave. Consolidation waves restore health to a trend and, more importantly, they set up the impulse waves that investors and traders aspire to capture.
On November 6, 2017, I outlined that, because the consolidation wave was complete, I expected an impulse wave to follow, and therefore, higher prices were likely. Since that date, Aurora Cannabis stock appreciated from $2.63 to a high of $11.83, tacking on 349.81% in two months’ time. This performance number is a testament to the value that technical analysis can bring.
The great thing about technical analysis and constructive price action is that, aside from just suggesting that higher prices were on the horizon, the wave structure can be used to create a price objective.
There are two ways one can go about creating a price objective: a linear objective, or a log-based objective. Both methods are created using the premise that impulse waves separated by a consolidation wave tend to mirror each other in terms of length. The linear objective uses the actual length of the impulse wave in dollars, while the log-based objective uses its length in percentage terms.
The linear objective was $3.80, and I outlined that I had the inclination to believe that the log-based objective of $10.00–12.00 was a more viable objective, given the market conditions.
On January 3, 2018, ACBFF stock hit my price objective as it put in a high of $11.83. Since that date, a correction has gripped Aurora Cannabis stock. Since this correction has begun, I have reason to believe that lower prices are on the horizon.
A Correction in Progress
The following Aurora Cannabis stock chart illustrates why I believe lower prices are on the horizon.
Chart courtesy of StockCharts.com
The indicator located in the lower panel of the ACBFF stock chart is the moving average convergence/divergence (MACD) indicator.
MACD is a momentum indicator used to distinguish whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum creates a path geared toward higher prices, while bearish momentum creates a path geared toward lower prices.
The MACD indicator is currently converging, and a bearish MACD cross is likely going to be generated in the coming days. This indication will suggest that bearish momentum is creating a path of least resistance geared toward lower prices. As a result, I would expect lower ACBFF stock prices to prevail.
The Fibonacci retracement numbers, which have been annotated on the Aurora Cannabis stock chart, are a technical tool used to gauge countertrend price objectives. The theory behind this tool is that a stock will retrace approximately 50%–62% of its move before the predominant trend reasserts itself.
As a result, I would not be surprised to see ACBFF stock find price support in the range of $5.80 and $7.00, which is highlighted by the blue box. What happens after these retracement levels are hit is dependent on the price action and indications that present themselves at that time.
After reaching my price objective, Aurora Cannabis stock is correcting and I have reason to believe that lower ACBFF stock prices are on the horizon. This view of lower prices was generated using technical analysis and I will maintain this view until there are indications suggesting that the correction has run its course.