We haven't taken a look at the Marijuana sector in a while, so today I'm going to review where the sector stands on an absolute and relative basis...and which stocks we're buying (if any).
Normally I'd have a pun or two here, but I've decided to take the high road and focus solely on the charts this time.
First, let's start at the index level with the Alternative Harvest ETF (MJ). prices gapped below our price objective at 12.60 earlier in the year, consolidated for two months, and then gapped back above it...forming an "island reversal" bottom on the weekly chart.
Click on chart to enlarge view.
Since then, prices have successfully retested support multiple times, so it would appear the bias is higher towards 22 as long as we're above 12.60.
Post #2 of 2 focuses on the absolute trends and stocks we want to be buying and selling.
In our first post, we talked about relative performance in Financials rolling over aggressively. On an absolute basis, the TSX Capped Financials Index is stuck below its December 2018 lows and 2015 highs, much like US Small-Caps, the German DAX, Euro Stoxx 50, and many of the other weakest markets out there. As long as prices are below 263, the bias is to the downside with a target near 210.
Post #2 of 2 focuses on the absolute trends and stocks we want to be buying and selling.
First, let's start with the TSX Capped Financials which represent 33% of the TSX Composite. This chart has spent the last four years putting in a major top and the underperformance looks likely to continue. From that perspective, can the TSX Composite continue to work sustainably higher if its best players are underperforming so drastically? I'd argue no.
In late August we started to see some signs of a potential bottom forming in Commodities as they approached long-term support with momentum diverging and in October we finally got a breakout.
Today that breakout in the Thomson Reuters CRB Commodity Continuous Index remains intact and the trend in Commodities as an asset class has shifted from one we want to be selling rips to one that we're buying dips.
From an intermarket perspective, there are a lot of signals we've discussed that support higher Commodity prices such as the AUD/USD and CAD/USD breakouts, and today I want to share three more data points that have shown up in the last few weeks.
The dash to trash is a big theme in the first two weeks of 2020, with names like Beyond Meat (BYND) and other beaten-down IPOs from the last year catching a bid and working their way higher.
We've been focusing a lot on the Marijuana sector over the last month because the ETF and many individual names are at levels where it would be logical for a reversal higher to begin.
Today we want to reiterate that potential and highlight two of the largest stocks in the space that are both liquid and offering a skewed reward/risk at current levels.
This is a quick follow-up to our last two posts on Canada (September 16 & December 10), updating our views and adding any new trade ideas for today's environment.
It's been about 4 months since our last Canada update and many of the trades we outlined there have run their course, so today I want to look at 3 stocks with a common catalyst to spark their next move higher.
Marijuana stocks have been an absolute disaster for longs in 2019, but one chart suggests that after a nearly 60% decline, the Horizons Medical Marijuana ETF and its components are set up for a counter-trend rally.
Here's the daily chart we've been using to guide us since the Horizons Medical Marijuana Life Sciences ETF (HMMJ) came public in April 2017. Following a quick double, prices settled into a 21-month range between 15 and 26 that was broken to the downside in late September after a failed breakdown and bullish momentum divergence were left unconfirmed.
After falling 35% from that failure and 60% from its 2019 high, the ETF is now showing signs of waning downside momentum as prices quickly recover from new marginal lows. It's also curious to note that this development is occurring at its IPO price around 10.
The TSX Composite Index is attempting to hold above its 2018 highs after breaking out earlier this month.
In early August we wrote a Canada Update for Premium Members outlining ideas (and another post 2 weeks ago), many of which are working well, however, we're following up on this post today with a stock on our watchlist that's become actionable.
