Don't Ignore This Chart

This Cannabis Stock is Higher than the Rest

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Sorry, I could not resist the pun in that head line. Relative and absolute strength is often dependent on timeframe. One stock may show upside leadership on a one month timeframe, but be lagging on the three and six month timeframes. For example, Tilray (TLRY) is up 16.37% over the past month, but down 43.35% over the last six months. This is why chartists should compare performance across different timeframes. The PerfChart below shows 3-month performance for the Alternative Harvest ETF (MJ) and six cannabis stocks. Only one stock is up over the one, three and six month timeframes: GW Pharmaceuticals.

Looking through the individual price charts, the Alternative Harvest ETF (MJ) and five stocks are below their 200-day SMA. Cronos (CRON) and GW Pharm (GWPH) are the only two above their 200-day SMAs. Thus, using the 200-day as the benchmark, these two are the clear leaders. GWPH is the furthest above its 200-day and the strongest of the two so I will focus on this chart.

GW Pharma is in an uptrend with a bullish continuation pattern in play. First and foremost, the stock is above the rising 200-day SMA. GWPH also recorded 52-week highs in early March and early May. Thus, the path of least resistance is up.

After hitting a new high in May, the stock corrected with the rest of the group into June. A falling wedge formed and the wedge lines are not that steep, which suggests a relatively mild correction. In other words, selling pressure was not that intense. The stock firmed around the 165-170 area the last few weeks and surged twice over the last four days. Buying pressure may be picking up and a break above the red resistance zone would be bullish.


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Arthur Hill, CMT
Senior Technical Analyst, StockCharts.com
Book: Define the Trend and Trade the Trend
Paper: RSI for Trend-Following and Momentum Strategies

 


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Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London. Learn More
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