It’s no secret Wall and Main Street are in a desperate search for a new drug. And rightfully so. But as an investment, Canopy Growth (NYSE:CGC) stock may prove the prescription of choice in 2021.
Let’s look at what’s happening off and on the price chart and why CGC stock is poised to be a solid investment heading into next year.
“Covid, Covid, Covid.” We’ve heard it more than a few times in recent days from the guy in the Oval Office. But unlike our president, many investors and population at large remain concerned about a still spreading pandemic, while praying and paying an arms race between drug manufacturers like Moderna (NASDAQ:MRNA) or Pfizer (NYSE:PFE) succeeds in more than one way.
A second critical race is also playing out right now. The stakes are the kind many view as incredibly important to the health of our country. It’s the U.S. election, of course, and that day of reckoning is finally at hand. But one stock already indicating a democratic Biden-led win, is Canadian cannabis producer Canopy.
In Monday’s session, shares CGC ramped higher by about 14%. With no fresh company-specific news backing the bid, it’s reasonable some investors are taking their cue from election polls which have consistently shown a Biden presidency as forthcoming. If that’s the case and the Democrats also take back Congress, the environment will increasingly favor Federal-level legalization of the cannabis industry.
Regardless of your political vote, vice presidential nominee Kamala Harris has made its administration’s intentions loud and clear regarding cannabis. If put into office, the party’s platform will look to secure full legalization of medical marijuana use, remove the drug from the list of Schedule 1 narcotics and allow states to set their own cannabis policy under the watch of the Justice Department.
To be sure, there’s plenty of ways to play this emerging market. Aurora Cannabis (NYSE:ACB) and Aphria (NASDAQ:APHA) are two very heavily-traded producers. Picks-n-shovels plays Scott’s Miracle-Gro (NYSE:SMG) and Innovative Industrial Properties (NYSE:IIPR) are two other interesting choices within the space.
But right now, if you’re going to cast your vote on the group, it would be particularly hard to find fault in buying the market’s largest producer, our Canadian neighbor Canopy.
CGC Stock Price Monthly Chart
Click to Enlarge
It’s been a long time coming. No, I’m not talking about the legalization of cannabis. I’m referring to Canopy’s long-term monthly chart and a slightly-flawed but formidable Fibonacci-based Gartley bottom.
After a decent amount of indecision in the last several months, Monday’s price action is clearing the air and appears bullish for investors buying CGC stock.
Technically, November’s first day of trade has taken Canopy up about 14% on the session and a similar amount above the high of the Gartley’s pattern bottom formed at ‘D’ on the provided price chart. Investors might be fearful shares are extended short-term. Given the size of the move it’s possible.
But that misses the big picture. And after five months of inside candlestick consolidation and Canopy having a reputation as a volatile stock, those fears look misplaced.
The Bottom Line
To be non-partisan, there are no guarantees when it comes to price charts. Still, considering Monday’s unusually strong bid, the larger Gartley bottom, a nearby five-month congestion breakout to further confirm the pattern low and favorably trending stochastics, I like what I’m seeing in Canopy.
Bottom-line though, to prevent a trading account from going up in smoke, as in days past I’d still advise a married put position as a favored strategy when buying stock in Canopy to get past Election Day and into 2021 with more confidence.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
