The Canopy Growth stock has been one of the hottest pot stocks of the past month. At around a month ago, it was trading in the 20’s. Last week it hit a high of around $56 a share, and has pulled back slightly to the 40’s since then. In this article we are going to talk about Canopy Growth, what the company does, talk about the technical analysis of it, where it might be headed, and how you can trade it. Let’s start by discussing what the company does:
Canopy Growth Overview
CGC is the largest producer of medical marijuana in Canada. It has seen its shares rise early in the summer in response to Canada declaring they would legalize medical marijuana sales, which obviously has positive repercussions for CGC revenue projections. It is the biggest company directly involved in the Cannabis industry in the US stock market.
Earlier this month Constellation Brands upped its stake in the company from 10% to 38%, lending a great deal of credibility to the up-and-coming company. It estimated that the Spirits and Liquor giant committed almost another $4 billion to Canopy Growth. It then got even better for CGC. Canada’s Centric Health announced a few days later it had entered a multiyear supply and service agreement with Canopy Growth. This deal made Canopy a supplier of medical cannabis to the specialty pharmacy.
CGC is one of the strongest weed stocks out there, second probably only to TLRY. However, it has slightly better fundamentals and is significantly less overbought. It had a textbook flat top breakout in August at the $36 level, and since breaking out it has not looked back. This has been a great stock to swing trade and day trade. If you are day trading this, it is crucial that you align your setups on the daily time frame.
The only significant resistance levels ahead is the $48 mark, and the all-time highs level at $52. Despite gapping down big yesterday, it was bought vigorously and actually closed green. This was a strong display of strength, indicating that we have some more upside next week. TLRY was the sector leader for the past week after its monster run, but it looks like CGC might be taking control again.
CGC may be a higher priced stock and have a big float, but it has had some incredible range the past few months. This thing trades 3-4 points of late, and you really only need to capture 1-2 points of that range to have a great trading day. 5%-10% moves have been a regular occurrence in this stock. The stock has great liquidity, and you can trade large size on this without having any major issues. If you are new at trading weed stocks, this is a great stock to start out with. It is much less volatile and more liquid than TLRY, and moves much slower.
CGC Trade Example
This is a trade we took in CGC a few weeks ago. Textbook flag pattern with great risk versus reward. You can see how we got multiple tests of the resistance level combined with a series of higher lows. The next day it even had an opening range breakout and then had some incredible follow through after gapping up, giving us a nice 3 point rip. The best setups in the upcoming week will likely be a long setup. Unlike TLRY, it is not in a great position to be shorting it, unless it gaps up large into resistance on Monday. We will talk about more patterns you can use to trade CGC on our webinar this week.
If you missed our last post in the series giving an overview of the pot stocks sector, you can check out the post here.
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