Marijuana Stocks: Cronos Stock Is leading the Pack
CRON Stock: NASDAQ Listing Acts Send Share Price Higher
For the first time in a long time, a significant selloff has gripped the markets, meaning the once-forgotten notion of volatility markets is back with a vengeance. The markets did find their footing in February following the dramatic selloff, but the violent swing continues as volatility remains high, and as a result, a retest of the lows cannot be ruled out.
The major market indices may have found their footing in February, but the marijuana stock sector failed to do so. After a spectacular finish to 2017, marijuana stocks peaked in late January and have been correcting ever since. I have been looking for a number of indications that would imply when this correction has run its course, but none of these indications have yet to be generated.
These is one bright spot in this sector, and it is Cronos Group Inc (NASDAQ:CRON). Cronos stock is making headlines because it is the first marijuana stock to make to the big board by trading on the NASDAQ exchange. Investors have come in to bid up the stock price as a result, and the appreciating stock price has generated a number of technical indications suggesting that higher CRON stock prices are likely to follow.
One of these indications stems from the price action, which is highlighted on the following stock chart:
Chart courtesy of StockCharts.com
This CRON stock chart focuses on the price action that occurred in early February, as the market regained its footing after the selloff and staged an advance.
The price action has been constructive in nature, creating the necessary building blocks to create and sustain a bullish trend.
These building blocks are made up of impulse waves (highlighted in green) and consolidation waves (highlighted in purple). Impulse waves define the stage in a bullish trend where the stock price makes a sustained move towards higher prices. Consolidation waves define the stage in a bullish trend where the stock price corrects, and refrains from advancing.
The corrective price action within this wave is very important because it creates the necessary conditions so new impulse waves can follow.
The move towards higher prices off the lows in early February, has been a perfect example of constructive price action creating a bullish trend. The initial surge of the low was an impulse wave, and the corrective price action that followed was the consolidation wave. In late February, the CRON stock price exited the consolidation wave, and an impulse wave is now in development.
This move towards higher Cronos stock prices has caused a very influential momentum indicator to swing into bullish alignment, which reinforces the notion that higher stock prices are now in development.
Chart courtesy of StockCharts.com
The influential momentum indicator highlighted on the CRON stock chart is the moving average convergence/divergence (MACD) Indicator.
The MACD indicator is used to distinguish whether bullish or bearish momentum is influencing the stock price. Bullish momentum creates a path of least resistance geared towards higher prices, while bearish momentum creates a path of least resistance geared towards lower prices. A stock cannot sustain a move in either direction unless the applicable momentum is supporting it.
This notion is especially true given the examples that have been highlighted on the stock chart.
On December 12, 2017, a bullish MACD cross was generated, and Cronos stock went on to appreciate by 203.57% before the stock peaked and began to correct.
This notion of a correction was confirmed on January 17th, 2018, after a bearish MACD cross was generated, implying that lower pries were likely. True to its nature, bearish momentum proceeded to influence the price action, and Cronos stock preceded to drop by 43.25% before it was finally able to find its footing.
On February 28 2018, a bullish MACD cross was generated, which coincided with the notion that an impulse wave is currently in development. These coinciding indications support each other in suggesting that higher Cronos stock prices are now in development.
If the stock is now moving higher, perhaps its peers will follow suit in the near future.
Analyst Take
I have been waiting for the marijuana stock to turn for a few weeks now, and Cronos stock is the first to do so. The catalyst was up listing on the NASDAQ and the resulting appreciation in price caused the generation of a number of technical indications that are currently suggesting CRON stock has completed its correction and higher prices are now in development.
