The cannabis sector has been consolidating in recent weeks following a nice surge in prices that began back in January thanks to favorable news. Like Bitcoin, this is a love or hate sector. One minute everyone is loving and hyping these stocks, and then the next minute everyone is hating them, especially when they don’t report the best financial situation or when they reveal some accounting irregularities.

While many traders and investors get caught up in the drama, they miss the story of the order flow which can only be found on a chart. And that is the story we pay most attention to for clues on when to get back in. This technical brief will focus on one particular stock that we are watching closely and that is Cronos (CRON).

Cronos Chart Update.
Bullish engulfing candle inside the consolidation.

Recent price action presents a consolidation which is typical before price resumes the broader trend which is still bullish. The 17.50 area serves as the range low (.382 of recent bullish structure) while the 24.18 area serves as the range high.

Now that there is a bullish engulfing candle present, any follow through can lead to a retest and likely break of the range resistance. Relative to the consolidation structure, the mid 26 area serves as a reasonable reference point for a profit target.

So based on what the chart is showing, a long entry some where between the current price and mid to low 20s offers an attractive reward/risk since you would be risking 3 to 4 points to make 5 to 6 points.

Keep in mind the mid 26’s present a reversal zone boundary which means price is more vulnerable to profit taking there. That does not mean it is guaranteed to reverse. The trend is bullish and price has a better chance at making a higher high which can take price in to the 27’s or 28’s just as quickly.

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There are a number of ways to capitalize on this trend, and the way we choose is to buy and sell the stock using options. We provide the details of our positioning to our subscribers and update regularly through our chat rooms. We are also in the process of opening an aggressive stock swing trade room which current subscribers will have access to as a bonus for their loyalty.

One helpful observation that we have been utilizing is the fact that the cannabis sector does its own thing relative to the rest of the stock market (S&P). This provides a nice selection of uncorrelated stocks that are less vulnerable to economic surprises and other variables that have to be considered when evaluating a stock that is part of a much more sensitive sector (energy, semi conductors, etc.)

In summary, Cronos is in a consolidation pattern which may be on its way to breaking out now that a sign of new momentum has appeared (bullish engulfing candle). We look for the best instruments to help control risk while providing the chance to let the market play out. Remember there are many ways to participate, not just buying the stock out right. The question we ask now is: after today’s candle, can price retrace slightly toward the 20 psychological support? That would be the scenario for us to take action.

Questions and comments welcome.

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1 Response
  1. Anandha Keanu Loustau-Khaou

    Hello,

    Thank you for the interesting article. My question relates to the Bullish Engulfing candle.
    I’ve seen it numerous times appear on several macro cap coins in crypto and even more alts on Daily, 3D or even weekly timeframes with decent volume only to have it lose most if not all of its momentum the following candle(s).

    My question is then, what is the best way for us swing traders to utilise the bullish engulfing candle to increase our chances of a positive trade?

    Sincerely,

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