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Trade of the Day: More Bullish Behavior in Canopy Growth Stock

CGC stock is flashing another buy signal

Marijuana stocks as a group had an outstanding couple of trading days recently. While that is nice for quick-hitter traders, what’s more notable is the technically sound pattern developing on stocks like Canopy Growth (NYSE:CGC). Barring any major reversal of this bullish development, this pattern looks promising for weeks, months, and possibly quarters to come.

Source: Shutterstock

For reference and in the interest of full transparency, when I last offered my take here on CGC stock on Nov. 21, 2019 I noticed an initial bullish reversal take place. Since then, this stock is nearly 20% higher.

Before digging into the charts, allow me to be clear that marijuana and pot-related stocks are a volatile bunch. This being a developing industry with strong growth highly exposed to decisions and headlines from regulatory bodies, these stocks are likely not for the faint of heart.

With that, let’s dig into some charts.

MJ ETF Chart

Source: TradingView

The popular ETFMG Alternative Harvest ETF (NYSEARCA:MJ), an ETF that has as its holdings most of the notable stocks in the space, has been in a well-defined bearish pattern since March of 2019.

Early January of this year MJ failed to break lower. And with the rally over the past few days, the ETF has managed to break out of a tight technical consolidation pattern as well as break above its yellow 50-day simple moving average for the first time since early 2019. This looks promising.

CGC Stock Charts

Source: TradingView

The multi-year weekly chart of CGC stock itself shows an equally persistent bearish pattern since the first half of 2019. Note however that in November 2019 the stock found important multi-year horizontal support around the $13-$15 area. This area acted as resistance until late 2017/early 2018. So far it looks like previous resistance is now acting as support.

Finally, on the daily chart we see that after a sideways shuffle most of December and consolidating the November bullish reversal, CGC stock began breaking higher. The stock broke above horizontal resistance, which also coincides with the blue 100-day simple moving average, all around the $21.50 – $22 area.

From here, while CGC stock could be somewhat overbought, barring any major bearish reversal, momentum should be in tact to break the stock higher toward the high $20s in coming weeks and months. A break back below $19 would be a clear stop loss signal.

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