ICC Stock: Anticipating a Break Above Price Resistance
The marijuana stock sector has turned on a dime. On August 14, the sector closed 4.5% lower. The next day, it closed higher by 12.9%. It has been trending higher ever since.
This abrupt reversal was the result of news breaking on August 15 that Constellation Brands, Inc. (NYSE:STZ) had increased its ownership stake in Canopy Growth Corp (NYSE:CGC).
This was very significant news for the entire sector. For one, Constellation Brands has set a precedent once again by paying a significant premium above market value in order to increase its stake in Canopy Growth.
Constellation Brands used the same tactic when it acquired its initial stake in Canopy Growth late last year. That ended up being a catalyst that sparked an incredible sector-wide rally. I do not think that this time around will be any different.
I am focusing on ICC Labs Inc (OTCMKTS:ICCLF, CVE:ICC) stock because I believe that the renewed enthusiasm for marijuana stocks is going to benefit ICC Labs stockholders. The reason is that the stock is inches away from generating a number of technical indications that will ultimately suggest that the stock is poised for much further gains.
With this momentum, the stock is testing a very significant level of price resistance. This level of price resistance is highlighted on the following ICC stock chart.
Chart courtesy of StockCharts.com
This ICC Labs price chart captures a significant level of price resistance that resides at $1.55, which was first established in February 2018.
This level of price resistance is very significant because it has thwarted all attempts to move beyond it. The number of failed attempts is a testament to its significance.
At this moment, resistance at $1.55 is all that is standing in the way of higher ICC share prices. I believe that if a sector-wide move in marijuana stocks is currently underway, similar to the one that developed late last year, then ICC stock will break above this level of price resistance and much higher prices will follow.
Breaking above price resistance is an excellent start, but a standalone signal is never enough to go on. In order to reinforce the bullish implications of breaking above a significant level of price resistance, another signal is needed.
Luckily, a break above price resistance will also generate a bullish momentum signal. This will be the reinforcing signal I am seeking in order to suggest that a sustained move toward higher ICC Labs stock prices is now in development.
The momentum indicator I am referring to is highlighted on the following chart.
Chart courtesy of StockCharts.com
This ICC stock chart highlights a momentum indicator known as the moving average convergence/divergence (MACD).
MACD is an influential momentum indicator that uses the crossing of a signal line 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 the opposite.
Momentum is a very powerful force, which is why a stock cannot sustain a move toward higher or lower prices unless the applicable level of momentum is supporting it.
For example, a bullish MACD signal was generated in December 2017, and it correctly suggested that the stock was geared toward higher prices. In the weeks that followed, ICC shares quickly doubled before the move toward higher prices petered out.
In March 2018, a bearish MACD signal was generated and ICC stock has been trading within a tight range ever since, valiantly trying to break above price resistance.
The good news is that the signal lines that created the MACD signal have converged. If ICC Labs stock can break above price resistance, a bullish MACD signal will be generated.
The combination of these two signals will be enough to suggest that a sustained move toward higher prices is in development. Given the current backdrop of the news surrounding Constellation Brands and Canopy Growth Corp, such a scenario seems very likely.
ICC Labs stock is on the verge of breaking above a significant level of price resistance (which resides at $1.55) and generating a bullish MACD signal.
When both of these signals are generated, I believe that ICC stock will sustain a move toward much higher stock prices.