Marijuana Stocks + Technical Analysis = Profits

Aphria, Inc. (NYSE:APHA) grows and sells marijuana. In additional to cannabis, their products include things like capsules and vaporizers.

On Monday the company announced that its President Jakob Ripshtein resigned. There has been considerable employee turnover in the upper echelons of management recently at Aphria. In January the CEO, Vic Neufeld and Co-founder Cole Cacciavillani announced that they were leaving. Time will tell if these changes are a good or bad thing.

The share price has fallen about 30% in the past month, but it just broke its downtrend after becoming oversold.

It has been consolidating around the $7 level. In this situation if I had been waiting to buy, I would go ahead and do it. This is because the downtrend line has been broken. Maybe this is because the sellers decided to cancel their orders because they are glad that Mr. Ripshtein is leaving.

There is nothing mysterious about trendlines. They are really just logic and common sense. If used correctly, trendlines should simply be graphical representations of the supply and demand dynamics that are occurring in markets. When the trend was headed lower it meant that the forces of supply were in control. Now that the downtrend has been broken, it illustrates that the forces of demand have equalized with the forces of supply.

Canopy Growth Corporation (WEED) is also a producer and distributor of marijuana. In terms of market capitalization, it is the largest Cannabis company in the world.

You don’t need to be a Market Guru to see that the levels between $65 and $70 have been an area of resistance. Since last September every time WEED traded up to these levels, the forces of supply stepped in and drove it down.

An important thing to understand about this company is that they have been losing money and seem to be headed in the wrong direction. Last year the loss was (.40) per share. That’s nearly three times greater than the loss of (.14) in 2017. It 2016 the loss was (.05) per share.

This is a situation where if I was considering selling, I would pull the trigger. If I was a buyer I would wait. The reasons are simple. It is starting to trend lower and there is resistance just overhead. The path of least resistance seems to be to the downside.

Aurora Cannabis (ACB) sells a lot of weed. The company just reported its last quarter’s earnings. Gross margins are a very strong 55%. Revenue grew 20% to 65 million Canadian dollars, which is roughly $50 million US dollars. That works out to be about nine tons!

It is clear that over the past eighteen months, the $14 level has been where the sellers come alive. It was the top in early 2018, then again in September, and most recently in April. If you are planning on selling this stock, knowing where this level is important. For example, suppose your broker or friend told you that the stock was worth $15 per share and suggest that you place your sell order at that level.

The fact that there is a lot of supply at the $14 level may prevent the stock from getting to $15. It may make a better decision to place the order at $14. Sure, it is a lower price but it is probably better than having your order at $15 not be executed because the stock once again got to $14 and then proceeded to head lower.

It is currently oversold and testing support around the $10.30 level. There is support there because it was resistance in November and January.

The Cronos Group (NASDAQ:CRON) - Produces and sell cannabis in Canada and Germany. You don’t need to be a Master Trader to see that the $14 level is important. It was resistance in September and December, and now it is support.

Support levels form because of the following reason. If a stock trades at a certain level vested interest develops. In September and December some investors sold short their stock at $14. For a while they were happy because they were thinking that they would be taking some profits.

But then in January the stock traded above that. The short sellers are now underwater and looking at taking losses. They tell themselves that if the stock trades back down to $14 they would close out their trades and break even. This means that now there will be buy interest and the $14 level will become support.

This is a situation where I would act whether I was a buyer or a seller. That is because it is either going to break support and fall or rebound and rise. It won’t stay at $14 forever.

You have to make a decision to act whether you are bullish or bearish. If you are correct and you wait too long, you may miss out on some profits.

Cannabis Sativa, Inc (OTCMKTS:CBDS) is engaged in all types of business related to cannabis, They develop, acquire, and license various products including edibles, recipes and delivery systems. Maybe they do too many things because the company has been losing money for years. Over the past five years it has lost about $40 million.

The stock has found support at prior support levels. This illustrates the importance of being aware of where the previous lows are. If you were considering buy this one and realized that it was in a downtrend and approaching levels that had been support in the past then it would make sense to wait because you would get a better price.

It has broken its downtrend and is consolidating. That means that the forces of supply have become equal with the forces of demand. While it was trending lower the forces of supply were in control. Now the forces of supply and demand have become equalized. This is what traders call sideways trading.

Horizons Marijuana Life Sciences ETF ( OTCMKTS:HMLSF)

You can see that this ETF is testing support around the $15 level. This level was support on April 15th. It is important because i was resistance in March and June of last year. It is also important psychologically.

Why is there support at this level? One reason is because there were investors who were considering buying it in April but never entered the trade. When they missed it, they told themselves that if it ever got back to $15, they would buy it. These dynamics form support.

This is one of the reasons why professional traders pay attention when stocks are approaching levels that were recent tops or bottoms. They understand these dynamics and use them to profit.

The long-term importance of the $20 level is obvious. It was resistance at the beginning of last year and again in September and October. This would be a logical pace to place a GTC sell order.

KushCo Holdings, Inc. (OTCMKTS:KSHB) is an example of an ancillary cannabis business. The company produces packaging products for the cannabis industry. It is a good idea to consider ancillary businesses for investment. Think of Levi Strauss. He wasn’t the miner. He was a person who sold things to miners. Whether you were a successful miner or not, you still would have need to purchase his goods.

It will be the same situation now. All the growers that will eventually go out of business still need to buy things like packaging.

There has been support around the $4.50 level going all the way back to September. There was also support these in early 2018. It is currently oversold and testing that support so I would expect to see some kind of bounce.

It is important to understand that when important support or resistance are being tested and markets are oversold or overbought, they trend to reverse. If they are not overextended, they tend to consolidate at the level before resuming their trend.