Sorry, I could not resist that title. Today's commentary will focus on the Alternative Harvest ETF (MJ) and six of its components. I am sure there are other cannabis-related names out there, but I would like to focus on the purer plays. For example, the Advisor Shares Vice ETF (ACT) is also listed as a play on cannabis, but this ETF also includes alcohol and tobacco, hence the "A" and the "T" in the name/symbol. The PerfChart below shows six month performance for the top ten stocks in MJ.
Before looking at this ETF and these stocks, keep in mind that this is a volatile space with above average risk. High returns do not come without higher risks. Even if they are not timely today, I think momentum traders and investors should have these names on their watchlist. This is an industry that could be in a secular growth phase and I will be following these stocks on a regular basis. The list below shows the top ten stocks in the Alternative Harvest ETF (MJ) and a few words on their business.
- GW Pharmaceuticals PLC (GWPH) - develops cannabinoids for medical treatment
- Cronos Group Inc (CRON) - Equity investor in cannabis-related companies
- Aurora Cannabis Inc (ACB) - Producer and distributer of cannabis-related products
- Canopy Growth Corp (CGC) - Producer and distributer of cannabis-related products
- Tilray Inc (TLRY) - Producer and distributer of cannabis-related products
- APHRIA INC (APHA) - Producer and distributer of cannabis-related products
- Green Organic Dutchman (TGOD.TO) - Producer and distributer of cannabis-related products
- CannTrust Holdings Inc (TRST.TO) - Producer and distributer of medical grade cannabis-related products
- HEXO Corp (HEXO.TO) - Producer and distributer of cannabis-related products
- Organigram Holdings Inc (OGI.V) - Producer and distributer of cannabis-related products
How to Mellow MJ
The chart below shows the appropriately symbolled MJ. There are some big swings since August with higher highs and lower lows. Thus, it is hard to discern a clear trend. On charts like these, I simply try to determine if the cup is half full or half empty. Price is above the rising 200-day and above the midpoint of the volatile range. The cup appears to be half full, which means I see more signs of uptrend than downtrend.
Clearly, MJ is not as mellow as its products. We can mellow out price action by using the TRIX, which is a triple-smoothed 1-day Rate-of-Change. TRIX is the 1-day Rate-of-Change of an EMA that has been smoothed three times. See the ChartSchool for the gory details. The 150-day TRIC is still positive and turned up over the last few weeks with a move above its 9-day EMA (the signal line). Keep in mind that this indicator has a lot of lag because of the triple smoothing and the 150-day lookback.
Aurora Cannabis Breaks Triangle Line
The first chart shows Aurora (ACB) with a bullish chart overall. The stock forged a higher low from August to December, a breakout in January, a triangle consolidation in February and a breakout here in March. Notice that the stock held the 200-day SMA and this SMA is turning up. The indicator window shows RSI with a bullish failure swing in January and two readings above 70, which show strong upside momentum.
Aphria Stalls after Breakout
Aphria (APHA) is a seriously volatile stock that fell some 78% last year and surged over 190% off the December low. Even with this massive gain, the stock still needs a 50+ percent advance to get back to its September highs. Make sure and take your heart pills when trading this one. Maybe they have some cannabinoid heart pills now. The price chart sports a wedge break in February and price is holding above the 200-day.
Canopy Growth Forms Bullish Pennant
Canopy Growth (CGC) surged over 100% from late December to early February and then stalled with a small triangle. This looks like a pennant, which is a continuation pattern. The prior move was up and this makes it a bullish continuation pattern. A breakout is in the making and this would target a move to new highs.
Cronos is the King
Cronos Group (CRON) is the current king of the cannabis stocks. As noted in the basic descriptions, CRON invests in cannabis-related companies and has a portfolio of companies. Sounds like a VC. CRON is the king because it hit a new high in February and is in a clear uptrend. After surging some 160%, the stock consolidated with a triangle in February. CRON broke out of this pattern on Tuesday and this signals a continuation higher.
GW Pharmaceuticals Hits New High
GWPH gapped up last week and surged to a new high. Even though the new high is bullish, the stock is also up 100% since late December and could be ripe for a rest. Watch for a falling flag or wedge to take shape, perhaps. Notice that it took a 100% advance to recoup the 50% loss. This is why stop-loss and money management are important parts of trading and investing.
Tilray Gets a Bollinger Band Squeeze
Tilray (TLRY) went from the most exciting (volatile) stock to the most boring. The stock IPO'd at 17, surged above 300 and then fell below 100. The stock managed to stabilize over the last few months and the range narrowed significantly over the last few weeks. Notice how the Bollinger Bands contracted to an eight point range as volatility subsided. Watch the upper and lower band for the next directional clue (breakout or break down).
On Trend on YouTube
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- Banks, Bollinger Bands and Bandwidth.
- Stocks to Watch: MLM, VMC, IRM, GLUU.
- Click here to Watch
- Arthur Hill, CMT
Senior Technical Analyst, StockCharts.com
Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill
