The cannabis market has been pretty dismal, but today’s partnership with Tilray and Novartis sparked a little bit of life into the space. What we are looking for is potential growth, and Cronos’s recent partnership with Altria and their supply deal in Germany and Poland provide an opportunity for international exposure.
The recent retrace of the gap up looks appetizing for a swing trade with a target of 15.0. Yet the sector as a whole is sporadically bullish, and regardless of the moves it can not find any grip. The current pattern looks good for a long swing trade but is it good enough?
It still looks a little to simple here and we really would like to see a better structural formation before entering. The challenge with trading too early is the likeliness of a push to 12.50 reversal and than blow out of the trade; close that gap and then rally.
The position is also tough from and options standpoint as it is not deep enough for us to look at selling PUTs quite yet. We would rather see an extreme pullback below the 9.0 area, as again the overall sector is not highly bullish. It is just messing around.
Regardless we are watching this one for a potential swing trade but we need to see a more evolved structure before taking it. Cronos can pullback to the 10.0 area before negating the wave count and this is what makes getting in too early risky.
There is a time to trade simple patterns and a time to leave them evolve. This is one of those times we will let the market play out and look for a higher probability setup. This is one that we want to own but we are taking our time in building a portfolio.
We will use both swing and options trades to accumulate shares, but since capital is limited, we have a few current position, and we are looking at others, we need to be selective in our entry points; looking for better formed structure.