Nobody doubts that cannabis stocks have gotten smoked this year. But is a bottom baked in? And could now be a good time to buy shares of Aurora Cannabis (NYSE:ACB)? Let’s see what’s happening both off and on the ACB stock price chart, before attempting to reach a stronger risk-adjusted determination.
To say the least, 2019 hasn’t gone as planned for Aurora investors buying into last year’s memorable December bottom. True, ACB stock did more than double in price during the first quarter. But if you held shares or worse yet, added to the position over the last eight months, it’s been a disaster. The painful fact is with less than a month in the calendar year, Aurora Cannabis stock is off roughly 47%.
The other painful reality is the punishing price action in Canada’s second largest cannabis producer hasn’t been without just cause either. Over the past several months’ prior investor optimism has been replaced with worries over consistent setbacks. Drags have ranged from oversupply issues, distribution headaches, ongoing regulatory challenges, rising costs and associated earnings disappointments.
Not that Aurora has been alone in its misery. It hasn’t. From Canopy Growth (NYSE:CGC) or Cronos (NASDAQ:CRON), to Aphria (NYSE:APHA) and Tilray (NASDAQ:TLRY), 2019’s bear market in cannabis stocks has been universal. But with the industry having left such a foul taste in the mouths of investors, it may be time to ask the question whether this December can prove as fruitful and provide the platform for a more jolly 2020?
Aurora Stock Monthly Chart
As of last month’s earnings report, conditions for ACB still appear problematic regarding the company’s top and bottom-lines and outlook. But the price chart is now showing signs of a turnaround. Further, with Wall Street known to climb a wall of worry and not wait around for feel-good headline RSVPs, it’s time to give Aurora a second and more serious look.
After eight consecutive months of lower highs and lows Aurora stock has just completed a Fibonacci-based two-step or mirror move pattern. The price design involves two legs, ‘AB’ and ‘CD,’ along with a middle countermove ‘BC.’ When the second leg has traveled the same distance of the first leg, the pattern is complete. The expectation for the next meaningful price reaction is for a move in the opposite direction.
In the case of ACB stock this means shares are now in position to move higher if we’re to trust a two-step pattern which finished near $2.35. Along with an oversold stochastics that has just signaled a bullish crossover, the prospects for a low are improved. Also, with Aurora stock testing a key support area formed after shares first came to the attention of investors back in 2017, the two-step’s completion becomes even more interesting.
Trading ACB Stock
My recommendation for buying ACB would be to put shares on the radar for purchase after, and if, monthly confirmation of a bottom is in place. That could happen this month if November’s high of $3.92 is taken out. An eventual signal could also occur in January if December finishes as an inside candlestick. Either way, the November low needs to hold in order for the current low to be deemed a playable bottom.
Bottom-line though, don’t treat Aurora stock as a widows and orphans investment like Coca-Cola (NYSE:KO). Keep money management more than just a passing thought when dealing with both profits and potential losses. And if you’re lucky, maybe 2020 and beyond can similarly prove to be ‘it’ with ACB investors.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.