WEED Stock: So Close, Yet So Far
There have been a number of developments on the Canopy Growth Corp (TSE:WEED) stock chart that are worth noting, and this is why I have decided to focus on WEED stock once again. The last time I focused on Canopy Growth stock, I mentioned that an opportunity was approaching, and that I would be looking for a number of indications to suggest that momentum has finally shifted, indicating that a bullish move was in the making. For those inclined, that report was titled “An Opportunity in WEED Stock Is Approaching,” and it was published on June 8, 2017.
Since the stock peaked in November of last year, the shares have traded with a bearish bias, where lower prices have prevailed. The trend towards lower prices began to accelerate after the government announced its framework with regards to marijuana legalization. The sell-off that followed this announcement was not even the slightest bit of a surprise, and anyone who has read my publications on marijuana stocks is well aware that I warned that such an outcome was likely to occur.
The sell-off in WEED stock was driven by the old adage of “buy on rumor, sell on news.” When the anticipated news regarding marijuana legalization was finally upon us, it was an indication for speculators to exit any outstanding positions and sit on the sidelines, awaiting a better opportunity to enter this lucrative space. In all honesty, this space was getting quite crowded by retail investors hoping to get rich quick, and I can’t even count the number of phone calls I was fielding with regards to this sector.
As I mentioned in my previous publication, I am looking for a number of indications to swing into bullish alignment, which will suggest that the tide is turning. The good news is that these indications have turned bullish, so progress is being made.
The following Canopy Growth stock chart illustrates these indications.
Chart courtesy of StockCharts.com
The indications I have highlighted involve a simple trend line and the moving average convergence/divergence (MACD) indicator.
The simple trend line, which is highlighted on the stock chart above, defines the bearish trend that began its development after the share price peaked in November 2016 at $17.86. This trend line is created by connecting the peaks on the WEED stock chart. It acted as a level of price resistance that prevented the stock price from advancing.
I mentioned in my last report that in order to even suggest that a bull market was in development, the stock price needed to break above this downtrend line. In July of this year, that feat was accomplished, which means that I am one step closer to renewing my bullish view on Canopy Growth Corp.
The MACD indicator is used to determine whether bullish or bearish momentum is influencing the stock price. In order for an investment to stage an advance or a decline, the applicable momentum is required, so as a result, it’s always wise to see which way this indicator is aligned.
In February 2017, a bearish MACD cross was generated, which served to suggest that bearish momentum is influencing the trading action in Canopy Growth stock. While this indication was in bearish alignment, WEED stock went on to lose 41.25% of its value before it was finally able to find its footing. In my last report, I mentioned that I needed to see this indication swing into bullish alignment, which would suggest that this investment is once again geared for higher stock prices.
It just so happens that a bullish MACD cross is currently in development, and therefore I am another step closer to renewing my bullish view on Canopy Growth Corp.
In my previous report, I outlined that I needed these two indications to swing into bullish alignment in order to generate a bullish view, which has occurred. The problem is that I must refrain from taking on a bullish view because WEED stock is trading below a key metric that needs to be overcome.
The following Canopy Growth stock illustrates this key metric.
Chart courtesy of StockCharts.com
The key metric I am still waiting on is the 200-day moving average. This moving average acts a dividing line that separates bullish investments from bearish ones.
In October 2015, the stock broke above the 200-day moving average and an epic move to the upside ensued. The scope of the rally that followed reiterates the importance and significance of a stock trading above this metric.
In May of this year, shortly after the announcement was made regarding marijuana legalization, WEED shares tumbled below this metric and the stock has failed to regain its footing above it.
I have two indications that are already in bullish alignment, and I am waiting for the Canopy Growth stock price to close above the 200-day moving average, which currently stands at $9.48, in order to renew a bullish view on this investment.
Bottom Line on WEED Stock
A number of indications on the Canopy Growth stock chart have swung into bullish alignment, suggesting that this investment is begging to turn. In order to generate a bullish view on this stock, I need the last missing piece to the puzzle, which would require that the stock close above its 200-day moving average.