Canopy Growth Corp. (CGC) has corrected to the downside in recent days. Is this a "sell the news" story as prices were strong up until the legalization day in Canada or is it something else? Let's drill down in our favorite combination of charts and indicators to see if CGC is a buy or a hold or a sell.
In this daily bar chart of CGC, below, we can see an equilateral triangle pattern from early September to the middle of October. Prices first broke out to the upside and quickly reversed to the downside. If you look under "w" in the dictionary you will find the word "whipsawed" and that is what happened. There may have been resting orders above the market and below the market that helped to drive the sharp moves up and down. There is chart support (former resistance) in the $35 to $20 area but it looks like today we are seeing prices stop short of that area. When you see buying come in before reaching support it is a sign of strength in my opinion. Prices are below the rising 50-day moving average line but above the rising 200-day line. The daily On-Balance-Volume (OBV) line shows weakness this month and tells me in hindsight that the false move to the upside was doomed because the OBV line was weak. The trend-following Moving Average Convergence Divergence (MACD) oscillator is close to crossing the zero line for an outright sell signal.
In this weekly bar chart of CGC, below, we see a mixed picture. Prices are still in an uptrend and above the rising 40-week moving average line. Volume is heavy and the weekly OBV line shows a strong rise and a two-month correction. The MACD oscillator has narrowed but has not yet crossed to the downside.
In this Point and Figure chart of CGC, below, we have a bearish downside price target of around $22.
Bottom line strategy: CGC has come back from its low today. It would be nice to see close higher as part of a reversal but I cannot tell the market what to do. By itself, I think CGC can move higher in the months ahead.