MGW Stock: Still Inclined to See Higher Prices
The markets are volatile, to say the least; the incredible euphoric moves toward higher prices that were witnessed in the marijuana stock sector late last year have given way to equally incredible painful moves to the downside as this entire sector is currently in the grips of correction. It did not do this sector any solitude that the stock market decided to swoon at the same time.
Corrections are a much-needed phenomenon in every bull market because they restore health to a bullish trend and, as a result, they should be embraced, not feared. In light of this, I have reason to believe that the market is likely to find its footing in the days ahead. Therefore, there should be some reprise for the cannabis sector and potentially another advance for stocks that are set up and inclined to do so.
I am focusing on Maple Leaf Green World Inc (OTCMKTS:MGWFF), (CVE:MGW) stock because I believe that this marijuana stock may be setting up for more gains.
I originally highlighted Maple Leaf Green World stock on November 28, 2017, right before it exploded to the upside in December with the rest of the sector, where it tacked on 267.86% in gains over five trading days.
Catching this investment right before it made its move involved some luck, but the main culprit suggesting that a move toward higher prices was on the horizon was the Maple Leaf Green World stock chart.
The following stock chart illustrates the technical price pattern that was responsible in suggesting that a move toward higher prices was likely to occur.
Chart courtesy of StockCharts.com
This stock chart illustrates a bearish trend that was characterized by a series of lower lows and lower highs. Connecting these series of lower lows and lower highs produced a descending channel that contained two parallel downward-sloping trend lines, which represent respective levels of price support and price resistance.
As long as the stock oscillates within the parameters laid out by the trend lines, the bearish trend is intact. Only when price support or price resistance is broken is the pattern finally resolved.
On November 13, Maple Leaf Green World stock broke above the trend line that represented price resistance, completing the descending channel, and suggested that MGW stock was destined to appreciate.
Such an event did occur, but anyone trading this pattern had to wait a month for this move to finally initiate. Luckily, there were indications also present that suggested that the stock price was set to accelerate.
I am going outline these indications because I believe that the current correction in MGW stock will be concluded when these indications suggest that the next price advance is set to take place.
These indications are highlighted on the following stock chart.
Chart courtesy of StockCharts.com
The first indication that was generated after the descending channel was resolved in a bullish manner was a golden cross.
A golden gross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). This popular metric is used to confirm that a bull market is in development.
The moving averages responsible for creating this indication remain in bullish alignment and MGW stock is currently trading above both, implying that there is very little risk of negating this signal at this time. Therefore, a bull market is still in development.
The second indication that was generated after the descending channel was resolved in a bullish manner was a bullish MACD Cross.
The moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator, where signal-line crossings are used to determine whether bullish or bearish momentum is influencing the price action in a stock. This is a powerful indicator because a stock cannot sustain a move toward higher or lower prices without the applicable momentum.
For instance, it was not a coincidence that the explosive move toward higher Maple Leaf Green World stock prices began right after a bullish MACD cross was generated. This also means that it was not a coincidence that a correction ensued when a bearish MACD cross was generated.
The MACD indicator, like all indications, is not perfect but I believe that once a bullish MACD cross is generated, it will suggest that the current correction in MGW stock has run its course and another attempt at higher stock prices will follow.
I believe that once this correction in Maple Leaf Green World stock has run its course, higher MGW stock prices will follow. So as a result, I am watching an influential momentum indicator that will indicate when higher prices are likely to prevail.