Patience Is Warranted With CRON Stock
Marijuana stocks are one of those sectors where investors cannot seem to satiate their appetite. This appetite is being stoked by their enthusiasm for what the future may bring for this industry.
On the surface, this may seem like a good omen, but I can assure you that this is not always the case.
The marijuana stock sector is currently flooded with retail investors.
This is a bit problematic because retail investors do not have the best record of being savvy investors. If anything, they usually show up after the majority of the gains has already been made, and they are the ones usually caught holding the bag. This is something we all want to avoid, because nobody wants to be caught holding the bag once a correction has begun.
This is why I believe that it is always best to leave your emotions aside and utilize a disciplined investment approach instead. This is also why I base my investment decisions on the indications generated on a company’s stock chart.
For example, I have chosen to focus on Cronos Group Inc (NASDAQ:CRON) because there is an exciting technical price pattern currently in development on the CRON stock chart. This pattern will determine whether the next sustained move in the stock price will be toward higher or lower prices.
The technical price that will determine the next directional move in Cronos stock is highlighted on the following chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on this CRON stock chart is a symmetrical triangle. Triangle patterns develop when the price action is characterized by a sequence containing a series of lower highs and higher lows.
Capturing this pattern was achieved by connecting the respective levels of higher lows and lower highs. This process creates two converging trend lines that pinpoint where significant levels of price support and price resistance reside.
At the moment, price support resides at $6.00 and price resistance resides at $8.00. These levels are important because, once Cronos stock escapes the pattern by either breaking above resistance or falling below support, the stock is expected to continue moving in that direction.
The move that follows is expected to be a powerful one because triangle price patterns are known for their powerful breakouts. This is why I am currently excited about the symmetrical triangle currently in development.
A bullish outcome is what investors are hoping for. If such an outcome is set to occur, it will need to be confirmed by a very influential momentum indicator.
The momentum indicator in question is highlighted on the following Cronos stock chart.
Chart courtesy of StockCharts.com
The momentum indicator highlighted on the above CRON stock chart is located in the lower panel.
This indicator is the moving average convergence/divergence (MACD), which effectively 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 the opposite.
A stock cannot sustain a move in either direction unless the applicable level of momentum supports it. This is why the waves highlighted on the Canopy Growth stock chart have been confirmed by this momentum indicator.
The wave highlighted in green on the above chart is an impulse wave.
Impulse waves are advancing in nature, which is why they capture the stage in a bullish trend when a stock stages a sustained move toward higher prices. Impulse waves need to be accompanied by a bullish MACD signal in order to sustain a move toward higher prices.
The wave highlighted in purple is a consolidation wave. Consolidation waves are corrective in nature, which is why they capture the stage in a bullish trend when the stock corrects and refrains from advancing.
This inability to advance is why consolidation waves are accompanied by a bearish MACD signal.
Impulse waves and consolidation waves feed off each other, creating the price action necessary to create and sustain a bullish trend.
The symmetrical triangle doubles as a consolidation wave within this wave structure. A resolution of this pattern will determine whether higher or lower Cronos stock prices, via an impulse wave, will follow.
The current wave structure is bullish, so it augurs for a continuation of this trend. As a result, I will be looking for a break above price resistance, which is accompanied by a bullish MACD signal. Only then will I believe that a sustained move toward higher prices is in development.
I am currently watching a pattern develop on the Cronos stock chart because a resolution of this pattern will determine whether the next sustained move in CRON stock is toward higher or lower prices.