CNTTF Stock: A Sustained Move Toward Higher Prices Is in Development
Since the middle of August, marijuana stocks have been on a complete tear to the upside. As a result, this sector is currently stealing the spotlight.
The catalyst that sparked this rapid move to the upside was a news event. On August 15, 2018, Constellation Brands, Inc. (NYSE:STZ) announced it was increasing its ownership stake in Canopy Growth Corp (NYSE:CGC).
The ramification of this news event continues to resonate. As a result, I am focusing on CannTrust Holdings Inc (OTCMKTS:CNTTF, TSE:TRST) because I believe it is poised for further gains.
My beliefs are based on a number of technical indications that were generated in days following the news event. These indications are suggesting that CNTTF stock is now geared for higher stock prices.
The first technical indication I am going to outline is a completed price pattern, which is highlighted on the following CannTrust stock chart.
Chart courtesy of StockCharts.com
The pattern captured on this CNTTF stock chart is a descending triangle.
Descending triangles are technical price patterns that are created when the price action is characterized by a series of lower highs and a constant static low.
I captured this pattern by connecting the peaks and troughs that were created by this price action. The end result was two converging trend lines.
These trend lines are very important tools because they pinpoint where significant levels of price support and price resistance reside. The reason why they are important is because, in order to complete the pattern, CannTrust stock needed to exit the pattern by either breaking above price resistance or below support.
This brings me to one of the reasons why I am currently focusing on CNTTF stock.
On August 24, 2018, CannTrust stock exited the descending triangle by breaking above price resistance, which resided at $6.75. The breakout completed the descending triangle, suggesting that higher prices were likely to follow.
And sure enough, higher prices did follow. In the days that followed the breakout, CannTrust stock tacked on an additional 14.22% in gains before it finally met price resistance at $8.40.
I believe that this completed descending triangle is the beginning of a much larger move toward higher prices. The reason why is that the pattern is an integral piece of a wave structure, which is currently suggesting that further gains are likely.
This wave structure and the influential momentum indicator that has been supporting it are highlighted on the following CannTrust stock chart.
Chart courtesy of StockCharts.com
This CNTTF stock chart highlights an alternating wave structure and an influential momentum indicator that are known to create and sustain bullish trends.
The alternating wave structure is made up of impulse waves and consolidation waves.
The waves highlighted in green are impulse waves. Impulse waves are advancing in nature. Therefore, they capture the stage in a bullish trend when a stock sustains a move toward higher prices.
The wave highlighted in purple is a consolidation wave. Consolidation waves are corrective in nature. Therefore, they capture the stage in a bullish trend when a stock sustains a correction.
The descending triangle highlighted earlier doubles as a consolidation wave. Its completion is suggesting that a sustained move toward higher CNTTF stock prices is now in development.
This suggestion that a sustained move toward higher CannTrust stock prices is in development is being reinforced by the moving average convergence/divergence (MACD) indicator.
MACD is an influential momentum indicator that distinguishes 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.
Without the applicable level of momentum, a stock cannot sustain a move in either an upward or downward direction. This is why impulse waves must be reinforced by bullish momentum and consolidation waves must be reinforced by bearish momentum.
For instance, the entire time the consolidation wave was in development, the signal lines that created a MACD indicator were in bearish alignment. It was not until the descending channel was finally completed that a bullish MACD signal was finally generated.
These coinciding indications are currently suggesting that a sustained move toward higher stock prices, via an impulse wave, is currently in development.
I am bullish on CannTrust stock because I believe that a sustained move toward higher prices is now in development. My beliefs are based on a number of technical indicators. As a result, I will maintain a bullish view on CNTTF stock until there are indications suggesting that a bullish view is no longer warranted.