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This new year began as a muted affair for Canopy Growth Corp (TSE:WEED) and other licensed marijuana producers, as the volatility and erratic trading action that became a staple of this sector ground down to a peaceful daze in recent weeks.
This lethargic trading action didn’t last long and, after Canopy Growth stock changed its ticker symbol to WEED stock, a new round of buyers stepped in to drive the price of Canopy Growth stock higher. On Monday alone, WEED stock ran up 10.55%, resembling the type of behavior that dominated the price action late last year.
My views on the marijuana sector have not been a secret; I have reiterated my views and beliefs with regards to the longevity of the bull market in marijuana stocks on more than one occasion.
I am a firm believer that the bull market in licensed medical marijuana producer shares like WEED stock will continue until that fateful day when the government finally announces the long-awaited details surrounding the legalization of marijuana and the guidelines for the recreation market. This is a classic “buy on rumor, sell on news” event, and I have zero interest in entertaining the notion that “this time is different.”
In my previous publication on this company, “Canopy Growth Corp: CGC Stock Is Now Set to Surge,” I outlined the price action on the WEED stock chart that suggested higher prices were a likely conclusion.
The following Canopy Growth stock chart illustrates the price action that supported this notion of higher prices.
Chart courtesy of StockCharts.com
The price action that has littered the WEED stock chart has been consistent and constructive, and it is one of the many reasons why this bull market continues to progress. The price action contains impulse waves that advance the price of the stock, and consolidation waves that alleviate any overbought conditions and set up the next impulse wave.
This alternating wave structure was responsible for the advance in price that took Canopy Growth stock from a low of $1.15 in August 2015 to a high of $17.86 in November 2016.
In January, WEED stock exited the consolidation wave in an upward direction, via a breakout, and this price action suggested a new impulse wave was set to develop. If the previous price action was a precursor of what was to come, then the same type of price action suggested that stock would attempt to revisit the all-time high of $17.86.
The breakout proved to be a lackluster event, and Canopy Growth stock traded sideways in the weeks that followed.
The following WEED stock chart illustrates the price action that followed the breakout.
Chart courtesy of StockCharts.com
The Canopy Growth stock chart above uses a one-hour sale to illustrate that although price was moving sideways, it remained constructive in setting up the next advance.
This wave structure is similar to the wave structure that littered the daily charts, with one exception; this consolidation wave did not take the form of a triangle. The consolidation wave that is highlighted above took the form of a rectangle. Consolidation waves can take on many forms, but their purpose to alleviate overbought conditions and set up the next impulse wave always stays the same.
When Canopy Growth stock exited the consolidation wave in an upward direction, it triggered a wave of buying, and a new impulse wave is now in development. A re-test of the all-time high is still the next logical price objective.
Bottom Line on WEED Stock
Canopy Growth stock is once again on the move, and the all-time high that was set in November 2016, at $17.86, is a logical price objective. My bullish view on WEED stock is supported by the tailwinds created by the speculation surrounding the potential size and scope of the recreational marijuana market. These tailwinds will continue to support marijuana producers until legislation from the government is finally made.