NAC Stock: Bullish Price Action
The holiday season has just passed and, fortunately for me, I got to spend some time with family and friends. The topic of conversation ranged from politics to Bitcoin, but we were all in agreement that the legal marijuana sector is going to change the world on many fronts. It is safe to say that there was, and is, quite a lot of enthusiasm about this new sector.
There has been so much enthusiasm that the moves in this sector have become parabolic in nature. Under this process, a new breed of nouveau riche has been created as investors in this sector have been rewarded handsomely. I have my reservations for how long such parabolic moves can continue, but I am not going to bet against it.
I am focusing on National Access Cannabis Corp (CVE:NAC, OTCMKTS:NACNF) now because I have the propensity to believe that NAC stock is setting up to make a substantial move toward higher prices. This view was generated using technical analysis, which is just a fancy way of saying that I came to this conclusion by analyzing the National Access Cannabis stock chart.
What caught my eye was a particular technical price pattern that was just completed on the stock chart; it implies that higher National Access Cannabis stock prices are on the horizon.
This technical price pattern is highlighted on the following stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the above NAC stock chart is a triangle. Triangle price patterns are created when the price action is characterized by a sequence containing a series of lower highs and higher lows.
These patterns are captured using two converging trend lines that were created by connecting the series of higher lows and lower highs. The upper trend line represents resistance, while the lower trend line represents support. The converging nature of these trend lines creates a dynamic in which the space between support and resistance contracts as the pattern develops.
This contraction of space causes energy to be built up and stored within the pattern that will finally be released when the stock price either breaks above resistance or falls below support. This is why triangle patterns are particularly explosive.
On January 22, National Access Cannabis stock broke above resistance, completing the triangle. The breakout highlighted on the stock chart suggests that higher NAC stock prices are likely to follow.
This triangle is actually a piece of a much larger wave structure, which is highlighted on the following stock chart.
Chart courtesy of StockCharts.com
This stock chart illustrates an alternating wave structure consisting of impulse waves and consolidation waves.
The waves highlighted in green are the impulse waves, and these waves capture the stage in a bullish trend when the stock stages a sustained move toward higher prices.
The waves highlighted in purple are the consolidation waves, and these waves capture the stage in a bullish trend when the necessary conditions are created so that a new advancing impulse wave can develop. In essence, consolidation waves set up impulse waves.
The triangle price pattern doubles as a consolidation wave, and its completion implies that a new advancing impulse wave is now in development and that, therefore, higher prices are likely to follow. This notion was already established with the completion of the triangle price pattern, but the great thing about this alternating wave structure is that it can also be used to create a potential price objective.
This price objective is created using the theory that impulse waves separated by a consolidation wave tend to mirror each other in terms of size. There are two ways to go about this: the linear way or the log-based way. The linear objective is created using the length in dollars, while the log-based objective is created using the length in size.
Applying both of these methods produces a linear objective of $1.00 and log-based objective of $2.30. Both price objectives are plausible but, since the moves in this sector have been parabolic in nature, I have to believe that the log-based objective is a genuine possibility for National Access Cannabis stock.
The completion of the technical price pattern on the National Access Cannabis stock chart implies that much higher NAC stock prices are on the horizon. I will maintain this bullish view as long as the price action continues to support it.