TRSSF Stock: Coinciding Levels of Price Support Are Not a Coincidence
2019 has just begun, and I am pretty sure that many are hoping it will bring a change in fortune, because the previous year ended on a sour note. December 2018 ended up being the worst-performing December on record for the stock market.
The selling has been broad-based, and very few sectors have been able to buck the trend. The most sought-after stocks are being cast away with reckless abandon, which is probably why marijuana stocks have been performing as poorly as they are.
I have scoured the sector, looking for one iota of hope, and I must admit that the immediate future for this sector continues to look bleak.
However, not all is lost, because I did come across TerrAscend Corp (OTCMKTS:TRSSF, CNSX:TER), and this marijuana stock is a standout. The reason I say that is because, from a technical perspective, the TerrAscend stock chart is not broken like many of its peers.
For instance, TRSSF stock is currently testing coinciding levels of price support. These levels of price support are highlighted on the following stock chart.
Chart courtesy of StockCharts.com
This TerrAscend stock chart illustrates coinciding levels of price support defined by a horizontal level of price support and the 200-day moving average.
The horizontal level of price support resides at $4.30. This price point was first established as a level of price resistance in March 2018. For the next six months, TRSSF stock traded below it.
In September 2018, TerrAscend broke above this level of price resistance, which opened the door for higher prices to follow. The move was quite dramatic, as the stock price appreciated to the tune of 108.1% over a four-week period.
When a significant level of price resistance is broken, it becomes a significant level of price support. At the moment, this level is being tested.
The significance of this test is magnified by the fact that the 200-day moving average currently coincides at this price point. As a result, both metrics are simultaneously being tested.
The 200-day moving average is a simple metric that is used to determine whether a stock is trading in a bullish state or a bearish state. Deciphering between these polar opposites is quite easy.
When a stock is trading above the 200-day moving average, it implies that it is in a bullish state and therefore likely to appreciate. Trading below it, on the other hand, implies that the stock is in a bearish state and likely to depreciate.
The 200-day moving average is widely followed, which is why it quite often acts as a level of price support in bull markets and a level of price resistance in bear markets.
It would be a significant event if TerrAscend stock can maintain its footing above this metric because it would also be maintaining its bullish posture.
The relative strength indicator (RSI) located in the lower panel of the chart above has generated a bullish signal suggesting that if price support does hold, a rally can follow.
RSI is an oscillator that is used to measure overbought and oversold conditions.
An RSI reading above 70 implies that a stock is overbought. An RSI reading below 30 implies that a stock is oversold. An RSI buy or sell signal is generated only after the oscillator returns from an overbought or oversold condition.
For example, in May 2018, an RSI buy signal was generated and it correctly indicated that TRSSF stock had reached a selling climax. As a result, higher stock prices followed.
A similar RSI buy signal was just generated and it is also suggesting that the stock has reached a selling climax, which is why higher stock prices are likely to follow.
The only caveat is that the RSI signal was created using a daily scale, which is not as significant as a weekly or monthly signal. Nonetheless, it is still a signal.
In order to confirm that TerrAscend stock is destined for higher prices, the trend toward lower prices needs to change course.
In order to indicate that this has indeed developed, the stock needs to break above the metric highlighted on the following chart.
Chart courtesy of StockCharts.com
This TRSSF stock chart captures the price action after the stock price peaked at $10.26, on October 16, 2018. Since that fateful day, lower lows and lower highs have graced the stock chart, which is also a quintessential characteristic of a bearish trend.
The downtrend line annotated on the chart above was created by connecting the series of lower highs that helped define this bearish trend. As long as TerrAscend stock is trading below this trend line, I can only assume that a bearish trend is still in development.
In order to suggest that the trend has changed course, the stock needs to close above this downtrend line, which currently resides at $4.70.
TRSSF stock is caught between price support and price resistance. One of these levels is going to give in the not-too-distant future, which will ultimately dictate what happens next.
I am watching the price action on the TerrAscend stock chart because I have reason to believe that if the stock price can maintain its footing above coinciding levels of price support, higher TRSSF stock prices will follow as a result.