Is CannaRoyalty Stock Destined to Break Out Toward Higher Prices?

cannaroyalty stock analysis
iStock.com/LARISA SHPINEVA

CRZ Stock: A Bullish Backdrop Creates a Bullish Tailwind

You may have noticed that I have been focusing on a number of marijuana stocks in recent days, and I assure you my reasoning is just. The entire legal cannabis sector is now on an upswing, which means another sustained move toward higher prices could be in the works.

On August 15, news broke that Constellation Brands, Inc. (NYSE:STZ) was increasing its stake in Canopy Growth Corp (NYSE:CGC). The news was applauded by investors; the bid pushed the marijuana sector up by more than 11.6% on the day.

Since that day, cannabis stock prices have continued to trend higher as the news continues to resonate. It really should not be surprising that the event has caused investors to flock to this sector.

Late last year, Constellation Brands announced its initial stake in Canopy Growth Corp. That announcement ended up being the catalyst for a spectacular rally in the marijuana sector. It looks like we’re on pace to do the same again this year.

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In light of this development, I am looking at CannaRoyalty Corp (OTCMKTS:CNNRF, CNSX:CRZ). The reason why I chose CannaRoyalty stock is that it stands out among its peers. On a relative basis, the stock has been outperforming, and I believe it is well positioned to participate in a sector-wide move.

My bullish beliefs are based on the price action that has been occurring on the CRZ stock chart. The stock has been in a well-defined bullish trend since May 2017, which augurs further gains.

This bullish trend is captured on the following chart.

Chart courtesy of StockCharts.com

The above stock chart captures a bullish trend that has been in development since June 2017.

The bullish trend contains price action containing a sequence of higher highs and higher lows. This is, of course, the quintessential characteristic of all bullish trends.

This price action has been responsible for taking CRZ stock from a low of $1.50 to where it currently resides at $5.10. This represents a remarkable 240% return over the past 14 months.

The uptrend line, annotated on the stock chart above, is a very important metric. Not only does it capture the bullish trend, but it also pinpoints where price support resides.

The reason it is important is that as long as CannaRoyalty stock is trading above this uptrend line, I can only assume that a bullish trend is in development and that higher prices will prevail over time.

Since this bullish trend began, the uptrend line has been tested on four separate occasions. Each time, the stock found support on the uptrend line and, in impressive fashion, higher prices have prevailed. These instances are a testament to the importance of the uptrend line.

At this exact moment, I am watching the development of a technical price pattern because I believe it will indicate when CRZ stock is poised to make another sustained move toward higher prices.

The technical price pattern I am watching is captured on the following CannaRoyalty price chart.

Chart courtesy of StockCharts.com

The technical price pattern highlighted on this price chart is an ascending triangle.

An ascending triangle is a technical price pattern that develops when the price action is characterized by a static high and a series of higher lows.

Connecting the peaks and troughs produced by this price action has resulted in the creation of two converging trend lines.

These trend lines capture the price pattern and pinpoint where price support and resistance reside.

This is very important information because the next sustained move in CRZ stock will be predicated on its ability to either break above price resistance or fall below price support. At that point, CannaRoyalty stock would be expected to continue trending in that direction.

Support currently resides at $5.75 and coincides with the uptrend line. Resistance resides at $4.30.

Given the current backdrop in the marijuana sector, I am anticipating that this stock will break above price resistance, completing the technical price pattern. This would suggest that a sustained move toward higher  prices is in development.

Analyst Take

I am bullish on CannaRoyalty stock because it is currently within the confines of a bullish trend, which augurs further gains.

Within this bullish trend, I am watching the development of a technical price pattern on the CRZ stock chart because I believe it will indicate when the next sustained move toward higher stock prices is set to occur.