CARA Stock: Bullish Tailwinds
Cara Therapeutics Inc (NASDAQ:CARA) stock has caught my eye for a number of reasons. The price chart is compelling and constructive, and the company is delving into the medical marijuana sector. What more can anyone ask for in the smoking-hot stock market?
Marijuana stocks have been setting the world ablaze, and new retail investors who are hoping they too can live out that sought-after American dream are clamoring to this sector. There are some signs that a bubble may be brewing in this sector, however, as the rally has been broad-based and any company that even mentions the words marijuana or cannabis in a press release gets a bid. I must admit, I have seen a few bubbles in my day, and this sector has the potential to become one, but it isn’t there yet.
Cara Therapeutics is developing cannabis-based products that target the body’s peripheral nervous system. This is an example of a pharmaceutical company trying to capitalize on a new segment of the economy that has alleged medical benefits.
Patients and doctors are now becoming aware that there are alternatives to the prescription drugs normally associated with treating certain ailments. CARA Therapeutics stock is set to benefit from this new demand for cannabis-related products and, as a result, CARA stock is getting swept up in all the madness that is driving marijuana producer stocks higher.
The following Cara Therapeutics stock chart illustrates the constructive and compelling price action.
Chart courtesy of StockCharts.com
CARA stock has become compelling and constructive because it has finally taken a turn for the best, as many of the bearish headwinds that were swirling around this company have begun to subside.
The first headwind was in the form of a downtrend line. This trend—highlighted in blue on the chart above and created by connecting the peaks on the price chart—had dominated CARA stock since August 2015. This downtrend defines the bearish trend of lower lows and lower highs as the price moves from the upper left to the lower right on the price chart.
This headwind was terminated when the price was finally able to break above the downtrend line in November 2016, in which two bearish headwinds were terminated at the same time.
The second headwind was in the form of a horizontal trend line. This line marked a key level of price resistance that took three attempts before it was finally broken.
The bullish resolution of the downtrend line and horizontal level of resistance was not too much of a surprise, because a bullish headwind began to swirl in May 2016.
This bullish headwind was in the form of a bullish moving average convergence/divergence (MACD) cross. MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. A bullish cross indicates that the bears have lost momentum and that the bulls are in control.
Now with those bearish headwinds terminated, it leaves the door open for further bullish headwinds to develop, and this is exactly what is illustrated on the following CARA Therapeutics stock chart.
Chart courtesy of StockCharts.com
In October, CARA stock generated a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is on the horizon. It is not uncommon for the trend to accelerate after such a signal is generated.
CARA stock is aligned to push higher as the bearish headwinds have been eliminated and the bullish tailwinds have begun to swirl. CARA stock is sitting above both moving averages, and this suggests that the path of least resistance is higher.
Bottom Line on CARA Stock
I am bullish on CARA Therapeutics stock because the price chart is suggesting higher prices, and the marijuana sector is red-hot at this moment. My view on CARA stock will remain bullish as the signals on the price charts support this view.