Cannabis Stock: This Is Why CRON Stock Is Likely to Outperform Its Peers

Cannabis Stock: This Is Why CRON Stock Is Likely to Outperform Its Peers
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CRON Stock Is One of the Very Few Marijuana Stocks Still Poised for Gains

Marijuana stocks continue to be a favorite among retail investors. As a result, some investors are using the current weakness that has plagued this sector and the general stock market to pick up their favorite marijuana stocks at a perceived bargain.

The reason I say “perceived bargain” is that, from a technical perspective, there is still much to be desired. Many stocks in the cannabis sector have suffered technical damage, suggesting that their stock prices are likely to suffer further losses.

The good news is that not all stocks in this sector are on an equal footing. There are a few stocks in this sector that have been able to separate themselves from the pack, and they have not suffered the same technical damage as their peers.

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Cronos Group Inc (NASDAQ:CRON) is an excellent example of a marijuana stock that has separated itself from its peers. It’s one of the few marijuana stocks that has not suffered any technical damage in the recent bout of market weakness. This suggests that, if this sector is set for a bounce, CRON stock will likely outperform its competitors.

For instance, the 50-day and 200-day moving averages remain in bullish alignment.

These moving averages are captured on the following Cronos stock chart. (Note: The chart says “CRON.TO” because the data dates back further on the Toronto Stock Exchange.)

Chart courtesy of StockCharts.com

This CRON stock chart captures a signal that is generated when the 50-day moving average and the 200-day moving average cross.

When the 50-day moving average crosses above the 200-day moving average, it generates a golden cross pattern. A golden cross suggests that a bull market has begun its development and that higher prices can be expected.

When the 50-day moving average crosses below the 200-day moving average, it generates a death cross pattern. A death cross suggests that a bear market has begun its development and that lower prices can be expected.

The chart above clearly illustrates that the 50-day moving average crossed above the 200-day moving average in August 2016, generating a golden cross. This bullish signal did not disappoint because, as indicated, a bull market did develop and higher CRON stock prices have prevailed ever since.

There were two instances over the years where a death cross was averted on the Cronos chart. Averted moving average crosses are also considered signals because the inability to generate or maintain a different signal is interpreted as an indication that the stock intends to continue on its current path.

In this case, Cronos stock’s inability to generate a bearish signal indicated that the stock was still on a path toward higher prices. This is why the stock price responded by accelerating in that direction.

Aside from the golden cross pattern, CRON stock is one of the few marijuana stocks I have come across that is still being influenced by a bullish moving average convergence/divergence (MACD). The MACD indicator is captured in the lower panel of the following chart.

Chart courtesy of StockCharts.com

The MACD indicator uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action in a stock.

A bullish MACD signal implies that bullish momentum is creating a path of least resistance toward higher prices. A bearish MACD signal, on the other hand, implies that bearish momentum is creating a path of least resistance toward lower prices.

The examples highlighted on the Cronos stock chart above are a testament to this notion because, each and every time a MACD signal was generated, the stock responded by either advancing or declining—depending on whether a bullish or bearish signal was generated.

In early December 2018, a bullish MACD signal was generated. As long as it remains in bullish alignment, it will continue to suggest that CRON stock is geared toward higher stock prices.

These are just a few of the technical indications that have separated Cronos from its peers, suggesting that it’s still poised for further gains

Analyst Take

Despite the sell-off that has struck the marijuana stock sector, Cronos stock is one of the few that has not sustained any technical damage.

A number of technical indicators remain in bullish alignment, suggesting that, if this sector is poised for a bounce, CRON stock is likely to outperform the other cannabis stocks.