EVE Stock: Will This Be the Precursor to Higher Prices?
Ever since news broke on August 15 that alcoholic beverage conglomerate Constellation Brands, Inc. (NYSE:STZ) was substantially increasing its ownership stake in marijuana producer Canopy Growth Corp (NYSE:CGC), marijuana stocks have been set ablaze.
Now, on any given day, there’s a cannabis stock making serious and substantial gains, as investors’ appetite for marijuana-related stocks is insatiable.
It’s no secret that marijuana is going to become legal on a recreational basis in Canada on October 17. Brands are going to come into play, because this is how recreational consumers are going to differentiate their pick of the crop.
This is why I am currently focusing on Eve & Co Inc (OTCMKTS:EEVVF, CVE:EVE). Eve & Co is a marijuana producer that has created a niche market for itself as a premier female-focused brand. The company plans on educating and supporting first-time buyers and users in order to destigmatize the use of cannabis among females.
Investors seem to like the prospects of this company, because the factor that I find most compelling about EVE stock is the price action that has been painted on the company’s stock chart.
For instance, on September 4, the stock broke above a very significant level of price resistance. This event, seen below, continues to suggest that Eve & Co stock is destined for higher prices.
Chart courtesy of StockCharts.com
This chart captures a characteristic that has been known initiate accelerated moves toward much higher stock prices. The characteristic I am referring to is when a stock creates a high shortly after inception, and then breaks above it on a later date. For some reason, this characteristic is known to initiate an accelerated move toward higher stock prices.
If you’re looking for a great example in the marijuana stock space, look no further than Tilray Inc (NASDAQ:TLRY). The Tilray stock chart contained this exact characteristic, which was the precursor to a mind-blowing move toward higher prices.
In the case of Eve & Co Inc, the stock price created a high of $0.35 on July 5, and then the stock proceeded to sell off. This high, which was also the all-time high, became a significant level of price resistance.
This price point was revisited on August 23, and EVE stock was unable to break above this level of resistance on its first attempt. This level was revisited once again on September 4, when EVE stock was finally able to break above it.
This break above price resistance is highlighted as a breakout out on the chart above. It implied that a move toward higher stock prices was likely to follow. Before the brunt of this move occurred, the stock price returned to test the previous all-time high from above.
Testing a previous level of price resistance from above is called a backtest, and it can be seen on the chart above. This price action serves to reinforce the legitimacy of the original break above resistance, while simultaneously establishing it as a new level of price support.
Backtests act like springboards, and once this one was completed on September 7, the stock price accelerated higher. The next trading day, September 10, saw EVE stock run as high as $0.66—which was 76% higher than the previous close—before settling back.
Since that wild day on September 10, the price action has been corrective in nature, resulting in the creation of the technical price pattern seen below:
Chart courtesy of StockCharts.com
The pattern captured on the above chart is a symmetrical triangle. This technical pattern is characterized by price action that’s dictated by a series of lower highs and higher lows. This price action causes the price range to narrow day after day.
This consolidation pattern, which is highlighted on the chart above using two converging trend lines, is the precursor to the next directional move that is expected to follow. This move is predicated on Eve & Co stock’s ability to break out of this pattern.
A bullish breakout will suggest higher prices are likely to follow, while a bearish breakout will suggest that support at $0.35 is likely to be tested once again.
Given the proximity of this pattern to the previous all-time high, as well as the implications of breaking above it, I have the inclination to believe that a bullish breakout is on the horizon, preceding much higher prices. However, nothing will be absolutely determined until a breakout actually occurs.
I believe that Eve & Co Inc is primed for further gains. These beliefs are based on the price action that has been painted on the stock charts presented above.
Because my beliefs are subject to price action, I will maintain a bullish bias on EVE stock as long as it is trading north of $0.35.