TER Stock: A Bullish Outcome Requires These Signals
Who would have ever imagined that one day, marijuana would become legal, let alone such a lucrative market sector? The last few years speak volumes about this sector, as marijuana stocks went on a tear, amassing great wealth for investors.
2018, unfortunately, has not been so fruitful for investors as the sector has been caught in the grips of a correction. Despite the poor performance, retail investors remain optimistic, especially with legalization looming this fall in Canada.
Excessive optimism is always a cause for concern because corrections rarely ever end under such circumstances. On average, corrections end after the excessive optimism turns into disgust and disdain, which causes the late longs to exit their positions in droves.
I am not so sure we have reached that point yet, but perhaps it is soon approaching.
The great thing about corrections is that they separate companies with good fundamentals from the bad ones. The really good companies tend to stand out like a sore thumb by outperforming their peers by a considerable amount.
I am focusing on TerrAscend Corp (OTCMKTS:TRSSF, CNSX:TER) stock, because it continues to outperform its peers. It is also up on the year, which is an extraordinary feat. TerrAscend stock has also set up a technical price pattern suggesting that this stock is likely to make a move in the not-too-distant future.
The technical pattern I am referring to is highlighted on the following TerrAscend stock chart.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the TER stock chart is a symmetrical triangle.
Symmetrical triangles develop when the price action is characterized by a progressive sequence of lower highs and higher lows.
Capturing this pattern was achieved by simply connecting the peaks and troughs that were created by the sequence of higher lows and lower highs. The end result is two converging trend lines that depict a triangle price pattern.
These trend lines are very useful because they pinpoint where price support and price resistance reside. This is important information because the pattern will only be completed when TerrAscend stock exits the pattern by breaking above price resistance or below price support.
Once one of these events occurs, a powerful move will follow. The reason why is that the convergence of space between price support and price resistance causes energy to build within the pattern. This energy is only released when the pattern is finally completed.
TER stock is now caught between price resistance, which resides at $4.30, and price support, which resides at $4.00. This small range suggests that a breakout is on the horizon.
The retail public would love nothing more than a bullish breakout, where higher prices prevail. If such a development is going to occur, it will be accompanied by a bullish momentum signal, which is highlighted on the following TerrAscend stock chart.
Chart courtesy of StockCharts.com
This TER stock chart highlights the momentum indicator known as the moving average convergence/divergence (MACD) indicator.
MACD is a very influential momentum indicator that uses the crossing of a signal line to determine 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.
Momentum is very impactful and influential to the direction a stock is trading in. A stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it.
This is why, in a bullish trend, a bullish MACD signal implies that a stock is trending toward higher stock prices. A bearish MACD signal implies that a stock is correcting. The signals generated on the TerrAscend stock chart are perfect examples.
The trending move that began in November 2017, where TER stock appreciated to the tune of 570% over a four-month period, was accomplished while the MACD indicator was in bullish alignment. In mid-April, a bearish MACD signal was generated. TER stock has been correcting ever since.
Right now, the MACD indicator remains in bearish alignment, supporting the notion that a correction is still in development.
If the symmetrical triangle were to resolve itself in a bullish manner, it would need to be accompanied by a bullish MACD signal in order to suggest that TER stock is destined to trend higher.
TerrAscend stock is all set to make a powerful move toward higher TER stock prices. In order to suggest that higher TER stock prices are on the horizon, the technical price pattern needs be resolved in a bullish manner, and it needs to be accompanied by a bullish MACD signal.