Marijuana Stock: Anticipating the Next move in Canopy Growth Stoc…

TWMJF Stock: The Trend Is Your Friend

Wow, it has been a volatile year for Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED) stock and its peers. At one point, Canopy Growth stock was down as much 28.15% on the year, but those losses were quickly erased. TWMJF stock has turned those frowns upside down, and is currently up 109.24% on the year.

This exceptional level of performance in the latter half of 2017 has once again created a buzz for this company, and for marijuana stocks in general. As a result, I have been fielding a number of questions about where I believe the price of Canopy growth stock is heading next.

The best way I can answer is with respect to the pattern that is currently in development on the TWMJF stock chart. A bullish resolution of this pattern would suggest that further gains can be expected, while a bearish resolution would suggest that a larger correction is in store.

This technical price pattern is highlighted on the following Canopy Growth stock chart.

Chart courtesy of StockCharts.com

The pattern highlighted on the stock chart is a symmetrical triangle.

This pattern develops when the stock prices are characterized by a series of lower highs and higher lows, and it is best defined by using two converging trend lines. These trend lines are created by connecting the series of highs and lows that characterize this pattern. These trend lines act as levels of price support and price resistance.

Triangle patterns are very powerful because, as they develop, the convergence between support and resistance causes energy to build within the pattern. This stored energy is finally released when the stock price either breaks above the trend line that defines resistance or falls below the trend line that defines support.

Also Read: Marijuana Stock Predictions 2018: What to Expect from Weed Stocks

At the moment, support resides at $13.50 and resistance resides at $15.50, while the TWMJF stock price sits dead center in between. It is difficult to presume which direction this pattern will resolve itself, but, when I take the bigger picture into account, it supports the notion that perhaps resistance will be the trend line that will be broken and that, therefore, the next move would be toward higher prices.

The bigger picture is illustrated on the following stock chart.

Chart courtesy of StockCharts.com

The bigger picture has been annotated above in order to highlight the advance since June, which has been constructive in nature.

Constructive price action consists of a series of impulse waves and consolidation waves. These waves work in an alternating fashion in order to create the necessary environment where a trend can sustain itself and flourish.

The wave highlighted in green is the impulse wave. The impulse wave defines the stage in a bullish trend when the stock price makes an uninterrupted move toward higher prices. This wave captures all the gains that are created in a bullish trend.

The wave highlighted in purple is the consolidation wave. The consolidation wave defines the stage in a bullish trend when a stock price refrains from advancing, and instead stages a correction. This corrective price action is necessary in order to alleviate any overbought conditions that were created during the impulse that preceded it. This creates the necessary conditions for a new impulse wave to develop.

In essence, the consolidation wave ensures the health of a trend.

Since the share price bottomed in June, the bullish trend in Canopy growth stock has been supported by this wave structure. The symmetrical triangle that was highlighted on the previous chart is annotated as a consolidation wave on this TWMJF stock chart. The odds favor the symmetrical triangle that is in development resolving itself in a bullish manner, by breaking above resistance, because the trend that preceded it is a bullish one.

Analyst Take:

The technical price pattern that is currently in development on the Canopy Growth stock chart will determine which direction TWMJF stock is heading in next. The price action that preceded it was bullish in nature and, therefore, it increases the odds that this pattern will resolve itself in a bullish manner, suggesting that the next move in this investment is toward higher prices.