Taking a different approach today, starting with the long term weekly chart and we're at risk of losing the weekly uptrend that's been intact since July 2017. We're looking at must-hold support of 44.90, the loss of which would break the uptrend. This level will be in play next week. If 44.90 breaks our next support is 10% lower at 40.68, and then there's nothing on the weekly chart until 24.46, however I would expect to find support somewhere in the $37 range close to the Constellation bought deal price from August. We also have the weekly MA20 in that range which should strengthen the support in that area. The weekly candle is a bearish reversal candle and a potential volume climax, this is often a signal of a trend reversal.
Losing 44.90 would break the uptrend but it wouldn't immediately put us into a downtrend, we'd have to wait until we find a bottom, bounce, and then set a lower low to initiate a downtrend. Regardless, a break of this level would be significant.
We're also looking at bearish divergence on the weekly chart, where price action has set a higher high relative to January but RSI has set a lower high. The MACD does not show the same divergence.
"So, what happened this past week?"
This is a question a few people have asked me in person and online over the past 24 hours. Let's go back to the daily chart to look at the setup we had going into last week.
I've annotated the levels we were watching last weekend. Bulls needed a break of 51.21 and bears needed a break of 46.42. First thing Monday we got that break with big volume and a close at the high of the day. In almost every idea I've published over the past few weeks I've been reminding people that the sector has run over 100% in just a few weeks, and that was neither normal nor sustainable. Therefore, we were looking for a sell-the-news reaction to legalization. I was expecting that Wednesday and we got that on Tuesday instead, in the form of a gap up open, a volume climax and a bearish reversal candle. Wednesday and Thursday we saw a weak bounce attempt with a potential daily bear flag setup, with the low of Wednesday a must hold level. When we broke below 48.30 we confirmed that bear flag and confirmed Tuesday's bearish reversal candle.
So for clues on direction we zoom into the hourly chart.
We can see since the initial dump on Tuesday, every bounce has been just a lower high on the hourly. Once we stabilized a little bit we had our range between 48.30 support and 52.87 resistance (annotated with white lines). For me this was a no-touch zone because the action inside tightening ranges is choppy and difficult to play. I we watched as we set a lower high, then a higher low, and another low high (annotated with yellow lines). On Friday we had a clear equilibrium bear break, which was a signal for bulls to jump out and a signal for bears to open short positions. Anybody bull acting on this signal saved themselves over 6% of downside, and any bear acting on this signal had a nice 6% profit on the subsequent dump on Friday.
We bottomed out after 2pm on Friday after touching hourly oversold but the bounce so far is weak and is a potential hourly bear flag setup. That will confirm if we break the low of Friday 45.43. I do anticipate that level to be tested first thing Monday, we can see the bull volume on the bounce is much weaker compared to the bear volume on the dump.
CGC is the sector leader so if it shows continued weakness Monday and Tuesday you can anticipate weakness in other names as well.
If you're the type of person looking years out and holding, you don't care much about the last half of this post but you are very interested in the weekly chart above. If that level breaks you have an opportunity to stop out and look to reload, for example, 10% more shares for 10% cheaper with the same amount of capital. That's one more way you can compound your gains on these positions even when we see consolidation on the longer term charts.
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For anybody looking at any individual stock it is imperative to keep an eye on the overall market. The correlation of every individual name and sector to SPY market is very real and the market is showing significant weakness over the past three weeks with warning signs of further potential weakness potential into next week.
By the way, I do analysis on the entire sector across all the mj charts I publish. If you're not looking at all the names I talk about, you're not getting the full sector-wide analysis. Follow me to get updates when I publish ideas and pay attention to the mj names you typically don't look at too, so you can stay in the know and get the full picture.
Losing 44.90 would break the uptrend but it wouldn't immediately put us into a downtrend, we'd have to wait until we find a bottom, bounce, and then set a lower low to initiate a downtrend. Regardless, a break of this level would be significant.
We're also looking at bearish divergence on the weekly chart, where price action has set a higher high relative to January but RSI has set a lower high. The MACD does not show the same divergence.
"So, what happened this past week?"
This is a question a few people have asked me in person and online over the past 24 hours. Let's go back to the daily chart to look at the setup we had going into last week.
I've annotated the levels we were watching last weekend. Bulls needed a break of 51.21 and bears needed a break of 46.42. First thing Monday we got that break with big volume and a close at the high of the day. In almost every idea I've published over the past few weeks I've been reminding people that the sector has run over 100% in just a few weeks, and that was neither normal nor sustainable. Therefore, we were looking for a sell-the-news reaction to legalization. I was expecting that Wednesday and we got that on Tuesday instead, in the form of a gap up open, a volume climax and a bearish reversal candle. Wednesday and Thursday we saw a weak bounce attempt with a potential daily bear flag setup, with the low of Wednesday a must hold level. When we broke below 48.30 we confirmed that bear flag and confirmed Tuesday's bearish reversal candle.
So for clues on direction we zoom into the hourly chart.
We can see since the initial dump on Tuesday, every bounce has been just a lower high on the hourly. Once we stabilized a little bit we had our range between 48.30 support and 52.87 resistance (annotated with white lines). For me this was a no-touch zone because the action inside tightening ranges is choppy and difficult to play. I we watched as we set a lower high, then a higher low, and another low high (annotated with yellow lines). On Friday we had a clear equilibrium bear break, which was a signal for bulls to jump out and a signal for bears to open short positions. Anybody bull acting on this signal saved themselves over 6% of downside, and any bear acting on this signal had a nice 6% profit on the subsequent dump on Friday.
We bottomed out after 2pm on Friday after touching hourly oversold but the bounce so far is weak and is a potential hourly bear flag setup. That will confirm if we break the low of Friday 45.43. I do anticipate that level to be tested first thing Monday, we can see the bull volume on the bounce is much weaker compared to the bear volume on the dump.
CGC is the sector leader so if it shows continued weakness Monday and Tuesday you can anticipate weakness in other names as well.
If you're the type of person looking years out and holding, you don't care much about the last half of this post but you are very interested in the weekly chart above. If that level breaks you have an opportunity to stop out and look to reload, for example, 10% more shares for 10% cheaper with the same amount of capital. That's one more way you can compound your gains on these positions even when we see consolidation on the longer term charts.
_____
For anybody looking at any individual stock it is imperative to keep an eye on the overall market. The correlation of every individual name and sector to SPY market is very real and the market is showing significant weakness over the past three weeks with warning signs of further potential weakness potential into next week.
By the way, I do analysis on the entire sector across all the mj charts I publish. If you're not looking at all the names I talk about, you're not getting the full sector-wide analysis. Follow me to get updates when I publish ideas and pay attention to the mj names you typically don't look at too, so you can stay in the know and get the full picture.
Comment:
Take note that CGC's afternoon bounce cooled off the hourly RSI for potential further downside. Keep an eye on this level into next week