NEPT Stock: Waiting for One Last Signal
Marijuana legalization in Canada is quickly approaching. The Canadian government has explicitly outlined that the legal recreational cannabis market will go into effect in October.
The prospects of a recreational market has been fueling the speculation that has been running rampant in marijuana stocks, and the date set in October is likely to spur another frenzy.
This sector has just gone through a significant correction, but it seems to have run its course. A number of marijuana stocks have found their footing and have begun to make new highs.
Not all stocks in this sector are following suit; investors are picking and choosing which companies they believe will prosper in the new recreational marijuana market.
I am focusing on Neptune Technologies & Bioressources Inc (NASDAQ:NEPT) stock because I believe it will be among the names that outperform in the legal marijuana sector.
My beliefs are based on a number of technical indications that have begun to imply that a sustained move toward higher NEPT stock prices is on the horizon.
The first indication supporting my view is a completed technical price pattern which is highlighted on the following Neptune Technologies & Bioressources stock chart.
Chart courtesy of StockCharts.com
The completed technical price pattern highlighted on the above NEPT stock chart is a descending triangle.
This type of pattern is created when the price action is characterized by a sequence of lower highs that are accompanied by a static low.
The peaks and troughs created by this price action are used to capture the price pattern by connecting them using trend lines.
The trend line created by connecting the peaks identifies where price resistance resides. The trend line created by connecting the troughs identifies where support resides.
These trend lines are important because, in order to complete the pattern, Neptune Technologies & Bioressources stock needs to either break above resistance or fall below support. Once this event occurs, a powerful move is expected to follow.
The reason why a powerful move is expected to follow is that, as the pattern develops, the convergence of space between price support and price resistance causes energy to build within the pattern. This built-up energy is released once the pattern is completed.
On June 15, 2018, NEPT stock broke above price resistance, completing the descending triangle. This event was accompanied by a surge in volume, stemming from the built-up energy inside the pattern.
The surge in volume reinforces the implications suggested by this completed price pattern, which is that Neptune Technologies & Bioressources stock is now geared toward higher prices.
This notion of higher prices is also being reinforced by the wave structure highlighted on the following chart.
Chart courtesy of StockCharts.com
This NEPT stock chart highlights a wave structure and an influential momentum indicator, which are both responsible for creating and sustaining bullish trends.
The wave structure consists of impulse waves and consolidation waves.
The impulse waves, which are highlighted in green, capture the period in a bullish trend when a stock makes a sustained move toward higher prices. The consolidation waves, which are highlighted in purple, capture the period in a bullish trend when a stock corrects and refrains from advancing.
The descending triangle doubles as a consolidation wave, and its completion implies that a sustained move toward higher NEPT stock prices, via an impulse wave, are now in development.
In order to confirm the notion that a sustained move toward higher Neptune Technologies & Bioressources stock prices is now in development, I require a bullish signal generated by the moving average convergence/divergence (MACD).
MACD is an influential momentum indicator that distinguishes 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 the move. That is why the waves within the wave structure have been accompanied by the appropriate level of momentum.
For example, in September 2017, a bullish MACD cross was generated, which coincided with the development of an impulse wave. In March 2018, A bearish cross confirmed that a consolidation wave was in development.
In order to confirm that an impulse wave is currently in development, a bullish MACD signal is required. One has not been generated yet, but the signal lines that create this indicator are converging and, therefore, a signal can be created in the weeks ahead.
A number of indications are currently suggesting that Neptune Technologies & Bioressources stock is likely to appreciate. In order to confirm that higher NEPT stock prices are on the horizon, one more signal is required: a bullish MACD cross.