HYYDF Stock: Waiting for These Signals
Marijuana legalization is fast approaching in Canada, and investors are hoping to cash in on this new lucrative segment of the economy that is set to go into effect this fall.
My use of the word “hoping” to describe investor expectations was not an accident, because equity markets have a tendency to humble investor expectations.
Marijuana stocks have been gripped by a correction this year. Many investors are hoping that once the door is open to a recreational marijuana market, the stocks will respond by catching a bid and staging an advance.
I am not going to make any predictions. Instead, I am going to take my cues from the price action and technical signals being generated on individual company stock charts.
In this case, I am focusing on Hydropothecary Corp (OTCMKTS:HYYDF, TSE:HEXO). I believe the next move in HYYDF stock will be dependent on the direction in which it breaks out of the technical price pattern currently in development on the Hydropothecary stock chart.
The technical price pattern is am referring to is highlighted on the following Hydropothecary stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the HYYDF stock chart is an ascending triangle.
Ascending triangle price patterns are created when the price action is characterized by a static high and a sequence of higher lows.
Capturing this pattern was achieved by connecting the peaks and troughs created by that sequence. This process created two trend lines. The converging nature of these trend lines creates a picture depicting a triangle.
The trend lines that capture the symmetrical triangle are very useful. The upper trend line pinpoints where price resistance resides and the lower trend line pinpoints where price support resides.
In order to complete the pattern, HYYDF stock needs to exit the pattern. Price resistance resides at $4.20, while price support currently resides at $3.15. As long as Hydropothecary stock is contained within these price points, the ascending triangle remains in development.
Hydropothecary stock has just simultaneously tested price support and the 200-day moving average.
The 200-day moving average acts as a dividing line that separates stocks trading in a bull market from stocks trading in a bear market. When a stock’s share price is above the moving average, it is bullish. When the share price is below the moving average, it is bearish.
The ascending channel is developing right on top of the 200-day moving average. As long as the stock price remains above it, I will be looking for a bullish resolution of the symmetrical triangle.
A bullish resolution of the symmetrical triangle will go hand in hand with the indications highlighted on the following Hydropothecary stock chart.
Chart courtesy of StockCharts.com
This HYYDF stock chart captures a wave structure responsible for sustaining bullish trends and the momentum indicator that has been supporting it.
This wave structure consists of impulse waves and consolidation waves.
The waves highlighted in green are impulse waves. They define the period in a bullish trend when a stock stages a sustained move toward higher prices.
The wave highlighted in purple is a consolidation wave. It defines the stage in a bullish trend when a stock corrects and refrains from advancing.
The symmetrical triangle currently in development doubles as a consolidation wave. When it is completed, an impulse wave will follow.
The development of an impulse wave will be confirmed by the percentage price oscillator (PPO).
PPO is a very influential momentum indicator that is used to determine 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 that a stock is geared toward lower prices.
A stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it. This is why the wave structure highlighted on the HYYDF stock chart has been supported and confirmed by this indicator.
In a bullish trend, a bullish PPO signal supports and confirms that an impulse wave is in development. A bearish PPO signal, on the other hand, supports and confirms that a consolidation wave is in development.
In order to even suggest that Hydropothecary stock is geared toward higher prices, a break above resistance at $4.20 is required. The break needs to be accompanied by a bullish PPO signal.
HYYDF stock made a valiant attempt at accomplishing the feat in May. Unfortunately, that attempt was averted. Perhaps the next attempt will have better results.