HYYDF Stock Benefiting From a Sector-Wide Move
We are now in the second week of September. This month is infamous for being a poor-performing one for the major market indices. It seems like someone forgot to tell marijuana stocks that September arrived, because this sector is currently tearing toward higher values.
The reason for this upside surge was a news event on August 15, 2018, wherein Constellation Brands, Inc. (NYSE:STZ) announced that it was increasing its ownership stake in Canopy Growth Corp (NYSE:CGC). This news continues to resonate and, as a result, the entire legal marijuana sector continues to outperform.
In light of these developments, I am focusing on HEXO Corp (OTCMKTS:HYYDF, TSE:HEXO) because I believe that HYYDF stock is all set to benefit from a sector-wide move toward higher values. These beliefs are based on a number of technical signals, which are currently supporting such an outcome.
The first signal was a completed technical price pattern, which is highlighted on the following HEXO stock chart.
Chart courtesy of StockCharts.com
The technical price pattern captured on the above chart is an ascending triangle.
Ascending triangles are price patterns that develop when the price action is characterized by a sequence of higher lows and a static high.
Capturing this pattern was achieved by connecting the peaks and troughs created by the price action. The end result is two converging trend lines that create what looks like a triangle.
These converging trend lines are very important because they define where price resistance and price support reside. The completion of this pattern is dependent on the stock’s ability to break above price resistance or below price support.
At the end of July, and again on August 14, HEXO stock tested support outlined by the ascending triangle. This test of support coincided with a test of the 200-day moving average.
The 200-day moving average acts as a dividing line that separates stocks in a bullish state from stocks in a bearish state. Deciphering between these two polar opposites is as easy as determining which side of the moving average the stock is trading on.
As long as HYYDF stock is trading above the 200-day moving average, I can only assume that the stock is in a bullish state. This suggests that a bull market is in development.
The 200-day moving average has a habit of acting like a level of price support. After it was tested, the stock price turned higher. On August 27, HEXO stock was finally able to break above price resistance.
This break above resistance completed the ascending triangle. This event is now suggesting that higher prices are likely to follow.
The implications of the completed price pattern are being reinforced by the signals generated on the following chart.
Chart courtesy of StockCharts.com
This HEXO stock chart highlights a wave structure and an influential momentum indicator that are known to create and sustain bullish trends. The wave structure consists of impulse waves and consolidation waves.
The impulse waves are highlighted in green on the chart above. They capture the period in a bullish trend when the stock staged a sustained and progressive move toward higher prices.
The consolidation wave is highlighted in purple. This wave captures the stage in a bullish trend when the stock corrected and refrained from advancing.
The ascending triangle doubles as a consolidation wave. Its completion is suggesting that a sustained move toward higher prices, via an impulse wave, is now in development.
This idea—that a sustained move toward higher HYYDF stock prices is now in development—is being supported by the moving average convergence/divergence (MACD).
The MACD is an influential momentum indicator that distinguishes whether bullish or bearish momentum is influencing the price action. Bullish momentum implies that a stock is geared toward higher prices and bearish momentum implies the opposite.
Momentum is an influential force, and HEXO stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it. This is why the waves within the wave structure have coincided with the applicable MACD signal.
In the above chart, while the MACD signal lines were in bullish alignment, an impulse wave was in development. Furthermore, while the MACD signal lines were in bearish alignment, a consolidation wave was in development.
Shortly after the ascending triangle was completed, a bullish MACD cross was generated. The coinciding indications are why I currently believe that higher prices are now in development.
I am bullish on HEXO stock because I believe that higher stock prices are on the horizon.
These beliefs are based on a number of technical indications. As long as those indications continue to suggest that higher prices are on the horizon, I will maintain a bullish view on HYYDF stock.