Cannabis

Chart Attack: Is it Time to Buy this Cannabis Dip?

What to say about Cannabis stocks. You give us some hope, and then pull the rug from under us. If you are a member of Equity Guru’s Free Trading and Investing Discord channel, I highlighted some really nice Cannabis setups. The breakouts were confirmed, and we have been waiting for the retest of the breakout zone. Some of those happened last week…and it wasn’t too good. In this Market Moment, I will be looking at a few charts of interest, and the reader can then decide whether it is time to buy this Cannabis dip.

You always hear market participants advise buying into Stock Market weakness. Eloquently summarized as ‘Buy the F*cking Dip’. Could this apply to Cannabis? Let’s go over some positives here. The US government promised to legalize Cannabis on the Federal level. This was the big catalyst for Cannabis stocks earlier this year. Unfortunately, other things took precedent for the Democrats. Last week, there was some renewed hope. Led instead by the Republicans which surprised many people. Last week, Nancy Mace unveiled a Cannabis bill that many thing could garner bipartisan support. A bit personal for her too:

“I shared that I was raped,” Mace told Fox News, describing the “physical, mental, and emotional” trauma she suffered from that event, which caused her to be prescribed anti-depressant medications. According to Mace, that medication worsened her “emotion and feelings of depression” and she turned to cannabis for relief.

“I did cannabis when I was going through this,” Mace said. “Doing that really relieved some of the anxiety that I had and helped me get through some very tough times in my life. It was an extraordinarily difficult place for me to be. My world fell apart when that happened to me.”

Mace says she can “feel it in my heart” when she hears similar stories from other people, including veterans who suffer from PTSD.

This is the catalyst Cannabis bulls should be watching. If you don’t have faith in the government and elected representatives, then maybe we see progress due to the corporate lobby side. In June 2021, Amazon announced they would exclude marijuana from their comprehensive pre-employment drug screening program for unregulated positions. Amazon is supporting Cannabis legalization:

Given our previous support for legalizing cannabis at the federal level, as well as expunging certain criminal records and investing in impacted businesses and communities, Amazon recently announced our support for, and began actively lobbying on, the Marijuana Opportunity Reinvestment and Expungement Act of 2021 (MORE Act). We are also pleased to endorse the recently introduced Cannabis Administration and Opportunity Actread our comments on that legislation.

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We will look at some Canadian Cannabis companies in just a second, but I think the US space is where the catalyst and the move will come. In a nutshell, I prefer the US side more than the Canadian side. Above is the daily chart of the Russell 2000. In previous Market Moment posts, I have spoken about the small caps just coiled for a move to the upside. The breakout of the range finally happened…and coincided with the US Cannabis stocks popping. Now we are retesting the breakout zone. Which means this upcoming week will be huge for the Russell 2000 and US Cannabis stocks.

I am all about money flows, so this is something I consider: in a world where everything looks expensive, will money run into ‘cheap’ things? Commodities? Small Caps? And yes, even Cannabis. All look cheap compared to everything else in the markets. So some positives to watch out for.

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The US Cannabis ETF, MSOS, is retesting its breakout zone. Many Cannabis charts on the US side look exactly like this. Very similar structure to the Russell 2000 with the breakout and now retest. A big week. MSOS must attract buyers here to continue the momentum from the breakout, and continue on its new uptrend. A close back below support means we either range, or just continue to head lower.

Now let’s take a look at a few charts on the Canadian side. For more details on these companies, be sure to read Joseph Morton’s Cannabis piece just released today.

Tetra Bio Pharma (TBP.TO)

Tetra Bio-Pharma is a leader in cannabinoid-derived drug discovery and development with a FDA and a Health Canada cleared clinical program aimed at bringing novel prescription drugs and treatments to patients and their healthcare providers. Their evidence-based scientific approach has enabled them to develop a pipeline of cannabinoid-based drug products for a range of medical conditions, including pain, inflammation, and oncology. Tetra Bio-Pharma is focused on providing rigorous scientific validation and safety data required for inclusion into the existing biopharma industry by regulators, physicians and insurance companies.

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Tetra Bio had a nice pop and strong green candle on November 16th 2021. A nice 17% pop with 1.5 million shares traded. Nothing to scoff at. There is a chance of a bottoming pattern here. Those that follow my work know I love these kinds of patterns. What I want to see is a break and close above $0.24-$0.25. This takes out a resistance zone and triggers a new uptrend. With a million plus shares traded around $0.20, that is our big support zone. A close below would likely trigger those longs to sell and we drift lower. Let’s watch for structure to hold and a breakout to be confirmed.

 

Heritage Cannabis (CANN.CN)

Heritage Cannabis is a leading cannabis company offering innovative products to both the medical and recreational legal cannabis markets in Canada and the U.S., operating under two licensed manufacturing facilities in Canada. The company has an extensive portfolio of high-quality cannabis products under the brands Purefarma, Pura Vida, RAD, Premium 5, feelgood., CB4 suite of medical products in Canada, and ArthroCBD in the US.

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Okay…so this is a nice chart. We hit record all time lows at around $0.05 just a few weeks ago, and long and behold! It seems like we have printed and confirmed a bottoming reversal pattern. I see a cup and handle pattern with a trigger breakout above $0.075. Just like the Russell 2000 and MSOS, buyers MUST hold this zone this week. I really like the technical structure here, and bulls defending here can take us up above $0.11.

 

High Tide Inc (HITI.V)

High Tide is a leading retail-focused cannabis company with bricks and mortar as well as global e-commerce assets. The Company is the largest Canadian retailer of recreational cannabis as measured by revenue, with 104 current locations spanning OntarioAlbertaManitoba and Saskatchewan, and was featured in the third annual Report on Business Magazine’s ranking of Canada’s Top Growing Companies in 2021. The Company is also North America’s first and only cannabis discount club retailer, featuring Canna Cabana, Meta Cannabis Co., Meta Cannabis Supply Co. and NewLeaf Cannabis banners, with additional locations under development across the country. High Tide has been serving consumers for over a decade through its established ecommerce platforms including Grasscity.com, Smokecartel.com, Dailyhighclub.com, and Dankstop.com and more recently in the hemp-derived CBD space through CBDcity.com, FABCBD.com, and BlessedCBD.co.uk, as well as its wholesale distribution division under Valiant Distribution, including the licensed entertainment product manufacturer Famous Brandz.

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After a huge move this year, the stock began to consolidate. It has been consolidating since February. A nice wedge pattern provided support and resistance for the stock. The breakout finally triggered on November 11th 2021. A nice pop up to $10.00, which remains our resistance zone. This stock chart is a bit different. Unlike showing a successful retest, it is showing a failed retest. We would have wanted to see buyers step in on the retest of the trendline. Did not happen, which is why this will be a big week for Cannabis.

 

New Leaf Ventures (NLV.CN)

New Leaf Ventures Inc. is developing a cannabis sector-based scalable securities concept of focused financing and applied management to achieve earnings growth through targeted investment. The Company’s flagship enterprise is New Leaf USA and its subsidiaries, which provide licenses, real property, intellectual property and equipment for lease, certain administrative services and other ancillary services to a Washington-based Tier 3 Producer/Processor focused on cultivating, growing, processing, packaging, and distributing cannabis and cannabis related products.

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Another bottoming play to put on your watchlist. I like the structure here. We hit all time new lows in the past few weeks around $0.20. Now, some signs of bottoming. We just need the trigger to confirm the breakout and a new uptrend. We need a break and close above $0.25. One of my favorite set ups of the bunch right now.

 

VIVO Cannabis (VIVO.TO)

VIVO Cannabis™ is recognized for trusted, premium cannabis products and services. It holds production and sales licences from Health Canada and operates world-class indoor and seasonal airhouse cultivation facilities. VIVO has a collection of medical, health and wellness brands, each targeting different customer segments, including Canna Farms™, Beacon Medical™, Fireside™, and Lumina™. Harvest Medicine™, VIVO’s patient-centric, scalable network of medical cannabis clinics, has serviced over 150,000 patient visits. VIVO is pursuing several partnership and product development opportunities and is focusing its international efforts on Germany and Australia.

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VIVO is another bottoming play, but the structure is showing signs of breaking down. Had the potential of a cup and handle pattern with a break above $0.135. Instead, we are breaking below $0.10. It seems the stock is destined for a return test of previous record lows at $0.085. This is why I like to wait for the breakout confirmation before entering.

 

A few more quick charts of the big ‘bois’ here:

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I liked Tilray. It was my favorite set up on the double bottom breakout above $14.00. Thursday we retested and unfortunately closed below. Bulls couldn’t hold. Not really a good sign.

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Verano is another bottoming play with some good structure. We have something to work with here as long as the stock holds above $14.00. Watch for buyers this week.

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Canopy Growth, WEED, is another BASED looking chart. Support at $14.50 must hold, and the entry is a break and close above $19.00. Some real potential here.

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Aurora Cannabis gave us a tease with an inverse head and shoulders pattern. Unfortunately, the neckline retest did not hold. We closed below, breaking down the inverse head and shoulders reversal pattern. Not what bulls want to see, so let’s see if we can reclaim the neckline this week.

 

In summary, this will be a big week for Cannabis stocks. I favor the US side, and will be watching the price action of the Russell 2000 and the MSOS ETF. Keep in mind overall Stock Market weakness could lead to the Russell FAILING the retest. Markets are a bit shaky given the full lockdown in Austria, and signs that other European nations may follow.

 

 

 

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