CRON Stock: Here Is Where I Draw the Line on This Marijuana Stock

CRON Stock: Looking for the Next Catalyst to Spark a Rally
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CRON Stock: Looking for the Next Catalyst to Spark a Rally

There is chatter in the Twitterverse that a farm bill is set to be passed in the United States that would remove hemp’s designation as a controlled substance. The legislation would make it legal to grow hemp and sell hemp products in all 50 states. This would also give businesses the go-ahead to sell CBD-infused beverages nationwide.

This is potentially a huge event, and perhaps it will be the catalyst that sparks the next big rally in marijuana stocks. I am sure that cannabis stock investors would welcome anything that would put a bid back into this sector.

This group of stocks has not been faring well; it has been caught in a downdraft since marijuana was legalized in Canada on October 17.

In light of this potential catalyst, I felt it was appropriate to focus on Cronos Group Inc (NASDAQ:CRON) once again. The last time I focused on Cronus stock was on August 21, in a publication titled “CRON Stock Is on the Verge of a Powerful Breakout.”

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That article was a week after Constellation Brands, Inc. (NYSE:STZ) announced that it was increasing its stake in Canopy Growth Corp (NYSE:CGC). At the time, I stated that this announcement was likely going to be the catalyst that sparks the next sector-wide advance in the stock market.

I chose to focus on Cronos stock back then because, as the title of my earlier publication suggested, it was perfectly set up to take advantage of this catalyst.

As I predicted, a powerful move did follow, and in the days ahead, CRON stock ended up appreciating to the tune of 114.9% before a correction took hold.

The setup that was responsible for this powerful move is captured on the following stock chart.

Chart courtesy of StockCharts.com

This Cronos stock chart illustrates the technical price pattern, known as a symmetrical triangle, which was responsible for the incredible move that followed.

Triangle patterns are special because they are known to produce very powerful moves. The power comes from this pattern’s ability to store energy inside it as the pattern develops. The contraction of space between price support and price resistance as the pattern develops is a contraction in volatility.

Essentially, the development of this type of pattern is the calm before the storm. When the pattern is completed, this calm turns into a storm, and the elevated levels of volatility are responsible for the large moves that follow.

This is why, as soon as CRON shares exited the pattern on August 20, a surge of buying pressure hit the stock, pushing its price higher in the days that followed.

Not only was the triangle pattern responsible for the move, but it was also the “tell” that implied that such a move was on the horizon. That is why I picked Cronos stock in the first place.

Now, with the farm bill announcement looming, it is a good time to take a look at the CRON stock chart to see if there are patterns or indications that are acting as a “tell.”

The best indication I could come up with is highlighted on the following chart.

Chart courtesy of StockCharts.com

This Cronos stock chart, using a monthly scale, captures a bullish trend that has been in development since August 2017.

Defining this bullish trend was accomplished by simply connecting the lowest monthly stock price over the last year-and-a-half. The end result is what you see above, an immaculate uptrend line that continues to support the stock price.

Unfortunately, this uptrend is all that I could come up with at the moment. I could not find anything else that would act as “tell” to suggest that the upcoming farm bill is going act a catalyst to spark the next rally in this stock.

This uptrend line does, however, provide very important information.

Cronos stock is currently situated right above the uptrend line, which also acts as significant level of price support. Price support currently resides at $6.75. As long as the stock price remains pitched above the uptrend line, I can only assume that a bull market is in development and that higher CRON stock prices will prevail over time.

Breaking below the uptrend line, on the other hand, would negate this bullish assumption.

Analyst Take

Cronos stock is currently testing a very significant level of price support. It must maintain its footing above that level or it risks jeopardizing the bullish trend that has been in development since August of last year.

As long as the stock price is situated above that support level, I will maintain a bullish view on CRON stock.