Aurora Cannabis Stock Is on the Verge of Breaking Out

Aurora Cannabis Stock
iStock.com/Israel_Patterson

ACBFF Stock: A Sustained Close above $7.00 Will Set the Wheels in Motion

It has been months since I covered Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB). As a matter of fact, the last time I covered ACBFF stock was on May 1, 2018, in a publication titled, “This Will Determine When Aurora Cannabis Stock Is Set to Advance.

At that time, the marijuana stock sector was in the midst of a correction. I used that publication to outline the technical signals I needed in order to determine that the correction in ACBFF stock had run its course and that higher Aurora Cannabis stock prices were likely to follow.

The signals I was waiting upon were never generated. However, the breaking news surrounding Constellation Brands, Inc. (NYSE:STZ) and Canopy Growth Corp (NYSE:CGC) put a bid into this sector. As a result, Aurora Cannabis stock is on the verge of generating the signals I seek.

For instance, I am waiting upon a bullish resolution of a technical price pattern, because I believe it will open up a door allowing ACBFF stock to appreciate.

The technical price pattern I am referring to is highlighted on the following Aurora Cannabis stock chart.

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Chart courtesy of StockCharts.com

The technical price pattern I am currently watching on the ACBFF stock chart above is a descending channel.

Descending channels are characterized by price action containing a series of lower lows and lower highs. This price action is also a defining characteristic of a bearish trend.

The peaks and troughs created by the price action were used to capture the pattern. The end result is two downward-sloping trend lines.

These trend lines are very significant because they pinpoint where price support and price resistance reside. This is important information because Aurora stock needs to either break above price resistance or below price support to complete this pattern.

Aurora Cannabis stock is currently testing price resistance at $7.00, outlined by the descending channel. This level of price resistance also coincides with the 200-day moving average.

The 200-day moving average acts as a dividing line that separates stocks trading in a bullish state from stocks trading in a bearish state. Deciphering between the two is as simple as pinpointing which side of the moving average the stock is trading on.

At this moment, ACBFF stock is trading below the 200-day moving average. It needs to get above the average in order to reinstate its bullish posturing.

Breaking above the 200-day moving average would also complete the descending channel. These coinciding bullish signals would suggest that higher ACBFF stock prices are likely to follow.

This bullish development I just described may very well be on the horizon because a very influential momentum indicator is on the verge of generating a bullish signal, which would suggest that Aurora Cannabis stock is gearing up for higher prices.

The momentum indicator I am referring to is highlighted on the following Aurora stock chart.

Chart courtesy of StockCharts.com

The momentum indicator on the verge of generating a bullish signal is the moving average convergence/divergence (MACD) indicator.

MACD is a simple yet effective trend-following momentum indicator that uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action in a stock.

Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies that a stock is geared toward lower prices.

This is very pertinent information because a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting the move. This is why the wave structure highlighted on the chart above has coincided with the signals generated by the MACD indicator.

This wave structure I am referring to consists of impulse waves and consolidation waves. These waves work together in order to create and sustain both bullish and bearish trends.

The wave highlighted in green is an impulse wave. It captures the stage in a bullish trend when a stock sustains a progressive move toward higher prices. This wave has coincided with a bullish MACD signal.

The wave highlighted in purple is a consolidation wave. It captures the stage in a bullish trend when a stock corrects. This wave has coincided with a bearish MACD signal.

A break above resistance at $7.00 would complete the consolidation wave, suggesting that an impulse wave is in development. Such an event will almost certainly coincide with a bullish MACD signal, because the signal lines that create this indicator are on the verge of generating a bullish signal.

Once these coinciding events occur, I will finally have the necessary signals to suggest that a sustained move toward higher Aurora Cannabis stock prices is in development.

Analyst Take

Aurora Cannabis stock is currently testing a very significant level of price resistance at $7.00. I believe that if ACBFF stock can sustain a close above this price point, it would generate a number of bullish technical signals suggesting that much higher stock prices are likely to follow.