Morning Wake and Take (Profits)

As someone who was the head of trading at three different hedge funds, I can tell you that I have been in my share of research meetings. One of these funds invested in marijuana stocks.

The meeting usually consists of the investment team. An investment team is typically made up of portfolio managers, research analysts, and traders. The portfolio managers are the bosses and decide WHAT investments the fund will make. They are supported by the analysts who assist with the research.

It is the role of the traders to decide HOW the positions are entered or exited. The traders job to is to be the ‘eyes and ears’ of the fund into the market. The traders should know what is going on in the markets. This would include things such as being aware of relevant earnings releases or news stories, learning what other funds are doing, and knowing which price levels are important.

The research meeting typically starts with the trader discussing issues are effecting the markets and the fund’s investments. One of the most important things that the portfolio managers want to know, is where are the important levels in the market. In financial markets there are certain levels that are more important than others with regards to the amount of supply and demand that exists at them.

Knowing where these levels are can help make the investing profitable. For example, suppose a stock that a fund holds is trading around $36 and the research team believes that it is worth $38. The team may want to place an order to sell the stock at $38 because they believe that is the fair value and would be happy to get that price for it.

However, the trader may know that there is a significant sell interest in the market at the $37 level. In this case the team may be wise to consider placing the sell order at $36.50 instead of $38. This is because with all of the sell interest at $37, the stock may never get to $38. All of the buy demand may be filled at $37 and then the stock could head lower. It may not trade back up to the $38 level for years.

The team would have missed out on the chance to sell and take profits. They wouldn’t have received what they believe is the fair value, but accepting a small discount is probably better than holding on to the position and watching it head south.

If I was conducting a research in which we discussed the following stocks, these are the important market levels that I would make sure that the team be aware of.

WEED is currently testing support around the $65 level. You don’t have to be a Market Guru to see that the $65 level is important. This level was resistance from January through April and the top last September. If you are considering selling this you may want to pull the trigger. If you want to buy it, it may make sense to wait.

TLRY continues to trend lower. It has fallen by about 70% since October. This company has yet to earn a profit and the action of the stock illustrates that. It is hard to believe that it was actually trading above $250 last September. Wall Street clearly doesn’t get this one. The average target price is about $97 and the average rating is a ‘hold’. It is currently trading around $45.

ACB - The levels around $14 have been resistance. It was the top early last year, in the fall, and again in April. There may be support around the $10.30 level because it was resistance in April.

APHA - I am watching the $6 level for support because it was resistance throughout December. It is also oversold so we may see a little rally.

$14 is clearly an important level for CRON. It was resistance level last September and December so there will probably be some support there now. It is oversold so it may even rally off of it.

You don’t need to be a Market Guru to see that the $4.80 is important It was clear support last April, August, and again in December. Each of those times it became very oversold and rallied off of the level. When markets get to important support or resistance levels and become oversold or overbought then tend to reverse. When markets get to important levels and consolidate, they tend to eventually break the levels and start a new trend. The key to a profitable trade is to wait for the trend line to break before entering it. You won’t get the exact bottom or top price but the risk reward dynamics are much better than just guess.

This stock has been a monster. There is resistance at the $90 level and the recent uptrend has been broken. It looks to me like it will trade sideways or head a little lower in the near-term. This is a perfect example of an ancillary business that profits of off the Cannabis industry.. Think of the Levi Strauss model. You don’t want to be a miner. You want to be the person that sells things to the miner, because win or lose, they still needs picks, shovels, and jeans.