A Bull Market in Emblem Stock Is Predicated on These Indications…

EMC Stock: Patience Is Warranted

I have my eye on Emblem Corp (CVE:EMC) stock because I believe that there is an opportunity presenting itself in EMC stock and all the marijuana stocks that create this sector. 2017 has been a polar opposite to 2016; all the hype and hoopla that surrounded this sector stock has fizzled out, and marijuana stocks have come under pressure as a result. Emblem stock has been no exception.

I strongly believe that this sector will once again find its footing and stage a bullish advance. The hype and hoopla surrounding this sector was not unfounded, it was just a little ahead of its time. The emotions that drove investors to rush into this sector, which caused it to overshoot on the upside, are the same emotions causing it to correct. The problem with stock valuations is that if they can overshoot to the upside, they can also overshoot to the downside.

I have identified key levels on the stock chart that I will be using as indications in order to suggest that the selling that has plagued this sector has finally concluded.

These indications are illustrated on the following Emblem stock chart.

Chart courtesy of StockCharts.com

There are two levels that EMC stock needs to overtake in order to decisively suggest that the bearish trend that has plagued this investment has finally concluded.

The first level is identified using a simple downtrend line, which is created by connecting the peaks on the Emblem stock chart. This downtrend line effectively captures the quintessential characteristic that defines all bearish trends, which is a series of lower highs and lower lows.

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The EMC stock price needs to break above this downtrend line in order to suggest that the bearish trend has concluded. As long as the stock price remains below it, I can only assume that the bearish trend is intact and therefore lower prices are set to prevail. The share price is currently testing this downtrend line, and I am watching keenly to see what occurs.

Once this downtrend line is broken, Emblem stock will need to regain its footing above the 200-day moving average. The 200-day moving average is computed by taking the average price over the last 200 days and plotting that value on the stock chart.

This moving average acts a dividing line that is used to separate a healthy investment in a bullish trend and an unhealthy investment in a bearish trend. Using this moving average is quite easy because distinguishing between the two polar opposites depends on which side of the moving average the stock is trading. Trading above the 200-day moving average is a bullish indication, while trading below it is a bearish one.

I firmly believe that once the downtrend line is broken to the upside, the stock will quickly move on to test the 200-day moving average. When such a move will occur will depend on whether bullish or bearish momentum is influencing the stock price. Luckily, the following Emblem stock chart illustrates an indication that can help shed some light on this.

Chart courtesy of StockCharts.com

The focus on this EMC stock chart is the moving average convergence/divergence (MACD) indicator, which is located in the lower panel.

MACD is a momentum indicator that distinguishes between bullish and bearish momentum using the crossing of a signal line. A bullish MACD cross suggests that bullish momentum is influencing the stock price, which creates a path of least resistance that is geared towards higher prices. A bearish MACD cross, on the other hand, is the complete polar opposite, which carries bearish implications.

On February of this year, a bearish MACD cross was generated, indicating that bearish momentum was influencing the stock price. This indication confirmed that lower prices were set to prevail, and the bearish trend defined by the downtrend line soon followed.

At this moment, the MACD indicator is converging and a bullish cross is a possible in the weeks ahead. A bullish cross would imply that bullish momentum is influencing the stock price, and therefore, bullish momentum will be paving the road towards higher stock prices.

Analyst Take: 

I have been watching a number of levels and indications on the EMC stock chart because I have the inclination to believe that a bull market will once again grace Emblem stock and the entire marijuana sector. Once these levels are breached and the indications are generated, I will have all the reason to believe that higher prices are on the horizon. Until these events occur, patience is warranted.