Marijuana Stocks: Anticipating Much Higher NBEV Stock Prices

NBEV Stock
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NBEV Stock Is Still in the Early Innings of Its Advance

The House and Senate have finally reached a deal on the farm bill, and the lawmakers are expected to vote on it later this week.

This is exciting news, especially for marijuana stock investors, because there is a provision in this farm bill that hemp will no longer be designated as a controlled substance. This will legalize the crop under federal stature, which will allow cannabidiol (CBD) to be legally sold nationwide.

Companies like New Age Beverages Corp (NASDAQ:NBEV) stand to benefit from this move. The reason why NBEV stock is positioned to benefit is because New Age Beverages Corp has created a line of CBD-infused beverages.

The passage of the farm bill into law will open the doors for New Age Beverages Corp to sell its line of CBD-infused beverages nationwide. This will ultimately boost the company’s top and bottom lines.

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The growth that this company is anticipated to experience from its new line of beverages is why investors have already begun to bid up the price of NBEV stock.

Yes, New Age Beverages stock has appreciated a considerable amount since it bottomed in August (258.7%, to be exact), but I happen to believe we are in the early innings of a much larger move toward higher prices.

For one, the stock is now firmly trading above a very influential metric, which is highlighted on the following chart.

Chart courtesy of StockCharts.com

This stock chart highlights an influential technical indicator known as the 200-day moving average.

The 200-day moving average is a simple metric that is created by averaging the stock’s closing price over the last 200 days and plotting that value on the stock chart. This essentially creates a line that represents the stock’s average price over a one-year time period.

This line is used an indicator to determine whether a stock is in a bullish state or a bearish state. This is important information because when a stock is in a bullish state, it is likely to appreciate. While it is in a bearish state, it is likely to depreciate.

There is so much significance placed on this metric that it has a habit of acting like a significant level of price support in bull markets and a significant level of price resistance in bear markets.

Using the chart above as an example, while NBEV stock was in a bear market, the 200-day moving average acted as a significant level of price resistance. Each time it was tested, it ended up capping any further gains and lower prices followed suit.

This all came to an end on September 18, when New Age Beverages stock ripped through the 200-day moving like it was not even there. The move was so violent that the stock ended up appreciating by an additional 254.3% over the next three trading days.

This event indicates that the stock is now in a bullish state and is therefore likely to appreciate. This also means that, going forward, the 200-day moving average is likely going to act as a significant level of price support.

The reason why I believe that we are in the early innings of a much larger advance is because this violent move in September generated a number of bullish signals suggesting that a sustained move toward higher NBEV stock prices has just begun.

The signals I am referring to are highlighted on the following stock chart.

Chart courtesy of StockCharts.com

This New Age Beverages stock chart highlights a wave structure and an influential momentum indicator.

The wave structure consists of two distinct waves: an impulse wave and a consolidation wave.

Impulse waves are created when a stock makes a continuous move toward higher prices. Consolidation waves are created when a stock makes a counter-trend move and corrects. These waves work together, creating the stair-step price action that bullish trends are so famous for.

The violent move in September is suggesting that an impulse wave has just begun its development. This idea that higher NBEV stock prices are on the horizon is being supported by the moving average convergence divergence (MACD) indicator.

MACD is a simple yet influential momentum indicator. It uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the trading action in a stock.

Bullish momentum implies that stock is likely to appreciate, while bearish momentum implies that stock is likely to depreciate. A stock will find it difficult to sustain a continuous move in either direction unless the applicable level of momentum is supporting it.

This is why the wave structure has a habit of coinciding with the signals generated by the MACD indicator. For example, impulse waves are usually accompanied by bullish MACD signals and consolidation waves are usually accompanied by bearish MACD signals.

The violent move in September caused the MACD indicator to swing into bullish alignment, which supports the notion that an impulse wave is currently in development. MACD signals tend to linger for months, even years, and this is the reason why I believe that New Age Beverages stock is in the early innings of a much broader and larger move toward higher stock prices.

Analyst Take

I am bullish on New Age Beverages stock because there are a number of technical indications currently suggesting and supporting the notion that the stock is poised to make further gains.

I will maintain a bullish view on this stock as long as these indications continue to support the notion that higher NBEV stock prices are in development.