Understanding the relationship between fundamental analysis and technical analysis can mean the difference between decent gains and an absolute fortune. Take a look at how D.R. applied his technical expertise to these three cannabis stocks…

I’ve lived in the same house in Delaware for many years. We haven’t been compelled to move because it’s a bit like a nature oasis on the edge of our little university town.

We love it here because we get the best of both worlds. We live a medium-length walk from a large university with an enrollment of 24,000 students, yet our house in on an acre of virgin forest with a medium-sized creek running six feet from our screen porch.

With this vantage point, we get to view the world through two lenses.

Step out the front door, and we see suburbia: a bustling college town with great food and cultural activities that are just a 20-minute walk away.

Out the back door, we have a real-life nature reserve in the backyard. On any given day we’ll have two or three varieties of hawks hunting there. A momma fox and her two kits visit regularly. And last night a little spotted fawn slipped nimbly out of the underbrush and into the creek not 10 feet from me. Bambi then headed downstream lapping water and nibbling tender streamside plants without a care in the world.

I love seeing the world through these two different points of view.

And that’s very much how I see stocks – from both a fundamental and a technical perspective.

Let me explain exactly what I mean and why investors need to understand both sides…

Two Worlds of Analysis: Fundamental and Technical

Most people are familiar with fundamental analysis, which aims to understand a stock’s future prospects by looking at business factors like the quality of the management team, the strength of the company’s financial reports, and future prospects for new products and services.

In short, fundamental analysis projects the price of a stock based on the many variables that affect the financial health of the company.

Technical analysis, on the other hand, is the study of human psychology, which is represented in the form of price action on a chart.

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Since human psychology and emotions will always be a factor in stock markets, the study of historical price movements of a stock relay the fear and greed associated with that stock. Technical analysts look for repeatable patterns and indications that can predict future price movements.

It’s important to note that fundamental and technical analysis work together – at least when used well! Many firms and traders use fundamental analysis to identify the top companies to invest in and then use technical analysis to help identify or refine the best timing for buying and selling.

Here at the Institute, Greg and his team already give you tons of great information about the fundamental side of cannabis stocks.

Today, and in many future communications, I’d like to give you some insight into the technical aspects of cannabis stocks and point out how we can use that analysis to increase our profits in this growth area of the market.

For right now, let’s look at two tools that I use often.

The Best Tools for Technical Analysis

The first shows the movement of price in a group stocks relative to each other. The second is a broadly watched tool that shows us both the long-term trend of a stock and important areas of support and resistance.

Here’s a relative performance chart of some of the more popular cannabis names. This is a busy visual, but it’s useful because of all the information it packs into one chart (there are explanatory notes below):

Some takeaways from this chart:

  • Seven of eight of these top pot stocks are up for the year.
  • Six have 20% or more gains.
  • A whopping five have returns above 50% for 2019.
  • Volatility continues, with wide price swings seen in almost all the stocks.
  • This relatively new investing sector is outperforming almost all others.
  • Wide divergence of stock performance shows the importance of stock selection in these emerging companies.

One Technical Indicator That Attracts a Lot of Eyeballs

For decades, institutions and analysts have used the average price of the last 200 closes of a stock (called a “200-day moving average” or “200-day MA”) as an indication of the long-term trend of the stock.

If a stock is trading above its 200-day MA, then it is still in a long-term uptrend. Trading below the 200-day MA signals a stock in a long-term downtrend.

Because this move from an uptrending stock to a downtrending one is so important, the 200-day MA then becomes a key support level for a stock that is moving down, or a key resistance level for a stock that is moving up.

The three biggest market cap cannabis stocks are key technical junctures on their charts – all testing their 200-day moving averages.

Cronos Group (Nasdaq: CRON) has been a strong performer this year and has respected the 200-day moving average quite well with a strong bounce off that well-watched line in the past week.

Aurora Cannabis (NYSE: ACB) is also in a week-long test of the 200-day MA.

The biggest of the pot stock pure plays, Canopy Growth Corp. (NYSE: CGC), has moved on both sides of the 200-day MA over the past year and is currently looking to break through the 200-day line and resume its bullish run.

With Canopy set to announce earnings shortly after the market closes today, good news from the company could catapult the stock above this key level, receiving a slingshot effect back to the $50+ level.

With a volatile sector like cannabis stocks, adding a timing element to your buying and selling decisions is critical.

Using the tried and true formula of buying on pullbacks is a prudent way to time entries when adding a new company to your portfolio or adding to existing names in the Cannabis Investor’s Report model portfolio or the Cannabis IPO Insider model portfolio.

With three of the key stocks in the sector at important support levels, this is a good time to make those moves.

Make sure you have all the resources you need in order to make the biggest profits off of these plays.

For future articles and updates, let me know in the comments sections what other cannabis charts you’d like me to review or ask any of your questions about technical analysis!

Great Trading and God bless you,

D.R. Barton, Jr.

Cannabis Technical Trading Expert, National Institute for Cannabis Investors

P.S. It seems like everyone wants to get in on the CBD revolution. Martha Stewart announced her partnership with cannabis company Canopy Growth for a new line of hemp-derived CBD products. Willie Nelson has his own line of CBD-infused coffee beans. And major companies like Coca-Cola and Anheuser-Busch have even shown interest in CBD-infused beverages. With all of this major interest in such a rapidly growing sector of the industry, we’re entering the perfect CBD “sweet spot” where investors could potentially see mind-blowing profits. For your chance at these potentially lucrative profits, just click here.


Comments

29 responses to “How to Make Your Next Pot Stock Purchase at the Right Time”

  1. I trade on Fidelity. Can you or someone tell me how to bring up the 200 day MA on any given stock on that platform?

    • Hi, Ralph. I suggest downloading Fidelity’s Active Trader Pro software (it’s free). Pull up a chart, and click on “Indicators” in the menu at the top of the chart. A search window will pop up. Enter “Simple Moving Average,” and voilà. You can change the time period of the moving average, e.g., to 200-day as discussed above; to 50-day, which is a commonly-used intermediate-term indicator; to 20-day for a shorter-term view; or to any other time period you prefer. Hope this helps.

    • Hi, Ralph. I suggest downloading Fidelity’s Active Trader Pro software (it’s free). Pull up a chart, and click “Indicators” on the menu at the top of the chart. A search box will appear. Type in “Simple Moving Average,” and voilà, the MA will appear overlaid on the chart. You can change the time period of the MA, e.g., to 200-day as discussed above; to 50-day, a commonly-used indicator for an intermediate-term view; to 20-day for a shorter-term view; or to any time period you prefer. Hope this helps.

  2. Mr. Barton, Thank you for the insightful article. Greg has mentioned putting on his ‘trading-hat’ when we took profits on HEXO. He also had it on correctly when he recommended a well deserved ‘haircut’ on Charlotte [I heard that insiders were selling].

    I’m sure that many readers have a healthy appetite for professional technical analysis in this burgeoning new sector. We need a source of sound, experienced judgement, because there sure is a Lot of background noise from the big brokers. Welcome aboard, –JG

  3. Just curious if the interview with Ionic CEO is going to be published in the near future? What are your thoughts currently on Ionic? I see the shares dipped to .26 and are now at .30. They seem to have good management in place and a good marketing/ business strategy. Thoughts on future success for this company?

  4. These insights you share with us D.R. help ‘hush’ the noise in my brain . . . . especially when over- thinkin’ a purchase while trying to move forward w/ picks from the ‘Vault’. You an’ Greg see through the chaff an’ static of random actions . . . reducing the ‘Chance-Medleys’ of “oh shits”!
    I remain tall, dumb, an’ happy . . . ‘small potatoes’, Huss

  5. Please keep writing these reports they are clear, concise, and on point… pass the knowledge on… thanks..

  6. I am about to pick some starters but this is clear as mud. ACB is one I am leaning toward but not sure I should jump in or wait for a drop.
    I know there is a lot to learn but age is not your friend.
    Thank you for your sharing.

  7. On advice from Mr Robinson, I bought BLOZE months ago when first advised but it has lost ground since. I’ve kept it thinking it would eventually shine. My other cannabis stock have soared and I’m glad I bought them when they went recommended. What are your thoughts on BLOZE?

  8. This is all new to me. I have a few stocks that I would like to purchase but how do I start? Do I need a broker?

  9. Greg
    I have followed every recommendation you have made. Several are approaching 50% loss. At what point do we seriously consider selling before the money is all gone. Emerald has been listed as sell. What are your thoughts on stocks that are struggling. Being that all my stock has been rated a 5 I don’t want to do something I may regret. It would be helpful to here your thoughts on this subject.
    Thanks

  10. I am trying to make a buy, but having hard time finding an investment firm to join to make my investment. How do I find a investment company to join, where do I go.

  11. I understand you need to open an account with a Brokerage Firm first to be able to start buying stock in Cannabis. Which of the 3 you mentioned would you recommend first? I’m looking at Charles Schwab, and Fidelity beings there is a 0 minimum balance.

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