I have received many pot-stock related inquires since I sent out the Marijuana Review a few weeks ago, so I thought it would be good time to update and supplement my notes on where the sector stands.
While the marijuana sector is still in a roaring long term uptrend, the weekly charts of the leaders continue to show the potential for a short term relative top. The easy gauge for this will continue to be CGC and the $50 level. This is the key inflection point on the weekly chart and will keep you on the right side of the move. In terms of support, $39-$43 remains the initial weekly support zone with the bottom half of that range also being strong monthly support. For reference sake though, the 200dSMA is around $30 and would represent a very steep, but very possible ultimate low (not a prediction, just one of the possible paths). Several weekly grave stone candles in a row all rejected in the low-mid $50s will continue to have this looking vulnerable until it is able to show weekly closing strength over that area. With Canadian legalization kicking off in a week or two, it will be important to monitor these technicals to determine whether or not that will be a typical “sell the news” event, or if it will trigger the next leg higher for the sector. ACBFF and CRON are two other stocks that can help serve as gauges for the sector.
While (largely) Canadian investment quality pot stocks may need to cool off a little bit in a weekly sense, several US side penny stock pot stocks have undergone very tradable moves over the last few weeks. With news and media regarding legalization picking up over the next month or two, these penny stocks, especially the ones with lower floats, may experience sharp moves higher. I have looked over the 85 or so pot stocks on my watch list, and the two below have the potential for attractive trades over the comings weeks.
The best trade I see in the sector right now is MJMD. Over the last month this has put out numerous PRs and 8ks as it finishes its merger. It has shown a commitment to getting information out to share holders, and i suspect that over the next month or two volume will increase and become more consistent. This has the tiniest float in the sector (25k) so getting shares is very difficult on the bid. Two weeks ago the float momentarily was completely locked up (175×1) showing on the ask. $25 is the only level remaining before another float lock up. With the seasonally bullish time for pot stocks coming up over the next few months, the targets for a trade here could be $100+. This ran $2-$90 last January for reference. Because of the tight float there is a liquidity risk here, but controlling for position size can minimize the effect of that. As long as the company is active and putting out PRs, I see no reason not to be L this name at least in a spec position.
Another trade looks like a good bet is GRCU. This might look boring to some, but it has quietly put itself into a binary position at .008. The vast majority of SMAs are right at .0079/.008 and are currently support. The only resistance on the daily chart left is the 200dSMA at .009. Consecutive closes over this level will very likely trigger a volume and interest surge. Once holding .010 on weekly close basis, this could run hard. If .0075-.008 support breaks on close basis, that would be the first signal that the trade should be closed. Similar to above, as we approach the seasonally bullish period of the year, this looks like one that could see a large spike.
I will continue to publish these sector updates as I notice changes to the overall or intermediate trend. For more information on joining my trading service, just e-mail or tweet me @moon_shine15.