Marijuana Stock: CannTrust Stock Is All Set to Make Its Next Move

CannTrust-Holdings-Stock
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CNTTF Stock: Destined for Higher Prices?

Marijuana legalization in Canada is fast approaching, and I am getting fearful that a correction in this sector will quickly follow.

My fears stem from two notions. The first is that an event like legalization can act as a catalyst, sparking a selling event on the basis of an old adage like “buy on rumor, sell on news.” The second is that, as of late, I am constantly being approached by interested parties asking which marijuana stocks are a good buy right now.

This focus on one particular sector is suggesting that marijuana stocks are saturated with retail investors. The combination of these factors has led to very large corrections in the past.

Even though the threat of a looming correction is high and rising, dismissing this sector is very difficult at the moment because it remains red hot. On any given day, there are a number of stocks in this sector making substantial, almost ludicrous gains. That is why it’s best to remain nimble until a correction actually grips this market.

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At the moment, I have my sights set on CannTrust Holdings Inc (OTCMKTS:CNTTF, TSE:TRST) stock because the stock price has reached a very significant inflection point.

I am watching this inflection point with great anticipation because it will determine whether or not CNTTF stock is destined for higher prices.

This inflection point is a significant level of price resistance, which is captured on the following CannTrust stock chart.

Chart courtesy of StockCharts.com

The CNTTF stock chart above illustrates the significant level of price resistance that resides at $10.25.

This level of price resistance was first established in January 2018, and a violent correction quickly followed. This peak in price coincided with a peak in marijuana stocks in general. When the marijuana market corrected, CannTrust stock followed suit. So it’s not a coincidence that now that marijuana stocks have staged an advance, CannTrust stock has done the same.

The advance toward higher prices has been characterized by bullish price action and accompanied by the necessary technical indicators.

These attributes have been captured on the following CannTrust stock chart.

Chart courtesy of StockCharts.com

This CNTTF stock chart illustrates the price action that has developed since the stock began staging an advance on August 14, 2018.

This advance was characterized by price action containing a series of higher highs and higher lows, which is the quintessential characteristic that defines a bullish trend.

The bullish trend has been supported by a bullish MACD signal.

MACD is an acronym for “moving average convergence/divergence.” This indicator is used to determine whether bullish or bearish momentum is influencing the price action in a stock. This is important information because a stock cannot sustain a directional move toward higher or lower prices unless the applicable level of momentum is supporting it.

For instance, the bullish trend toward higher stock prices began days after a bullish MACD signal was generated, suggesting that bullish momentum was influencing the price action in CannTrust stock.

The MACD indicator remained in bullish alignment until a bearish MACD signal was generated on September 27, suggesting that the surge toward higher prices had come to an end and a correction had begun.

This correction has not been bearish by any means. It has taken the form of a consolidation pattern, which is very constructive in determining what the stock price is likely to do next.

This consolidation pattern has been captured on the following CNTTF stock chart.

Chart courtesy of StockCharts.com

Since September 19, 2018, CNTTF has been in a correction suggested by the MACD indicator.

Instead of selling off, the stock price action has been quite constructive. As a result, a consolidation pattern in the form of a symmetrical triangle has developed.

This technical price pattern is developing right beneath the significant level of price resistance at $10.25. A resolution of this pattern will determine whether or not this level of price resistance is likely to fall.

Breaking above this price point would create a new-all time high. New all-time highs are very bullish events because, with no overhead price resistance to contain the stock price, there is no saying how high the stock price can appreciate under the right conditions. That is why this outcome would open up the door for much higher prices to follow.

On the other hand, resistance may prove too much to overcome, which would cap the recent move, meaning lower CannTrust stock prices are likely to follow.

The answer will become apparent only after the symmetrical triangle pattern is resolved, when the price action either makes a higher high or a lower low.

Analyst Take

CannTrust stock has reached a very significant level of price resistance. The way the stock price acts at this inflection point will determine whether or not CNTTF stock is destined for higher prices.