Cannabis Update: Canopy Growth and Acreage Holdings

Let's look at the charts this morning.

On the Mad Money's second "Executive Decision" segment Thursday night, Jim Cramer sat down with Bruce Linton, chairman and co-CEO of Canopy Growth (CGC) , and Kevin Murphy, chairman and CEO of Acreage Holdings (ACRGF) . The two parties have agreed to a deal for Canopy to acquire Acreage Holdings when cannabis becomes federally legal in the U.S. We looked at the charts of CGC in the middle of the month by the way.

The deal will make it easier for Canopy Growth to dominate in the U.S., Linton said. Canopy can pass on its brands, skills and intellectual property, to what is already a great operation in the U.S. Murphy added that Acreage Holdings has an excellent management team and its board of directors is very solid with great values. They hold corporate governance at a very high level and that will hopefully make partnering with major brands easier in the future.

 

It's bigger than the U.S. though, with Linton explaining that CGC is pushing into other countries like Denmark, Spain, Australia and Germany. "This is a global thing," he said, as Canopy is now in 16 countries. These countries want jobs, they want cannabis companies to follow the rules and to bring their products. "That's where we live," he added.

 

As acceptance grows, Murphy said social consumption will power more adoption. That's in various forms, like vaping, candy, food products and tie-ins with major brands. Linton estimates that the global cannabis disruption can be around $400 billion. Let's check out the charts again this morning.

In this updated daily bar chart of CGC, below, we can see that prices traded sideways to lower from our mid-month rewrite-up. Our strategy of looking to go long on strength above $53 means we are still on the sidelines. Prices are below the declining 50-day moving average line and testing the rising 200-day line.

Volume has slowed and the On-Balance-Volume (OBV) line is flat to just slightly lower. The Moving Average Convergence Divergence (MACD) oscillator has moved below the zero line for an outright sell signal.

In this weekly bar chart of CGC, below, we can see that prices are testing the now cresting 40-week moving average line.

The weekly OBV line is pointing down suggesting that sellers of CGC have become more aggressive and the weekly MACD oscillator has crossed to the downside for a take profits sell signal.

In this Point and Figure chart of CGC, below, we can see that the software still projects an upside price target but a decline to $41 is likely to turn the chart neutral or even bearish.

Let's look at ACRGF. In this limited daily bar chart of ACRGF, below, we can see that prices have traded sideways. Trading volume has generally increased over the past three months and the daily OBV line is up from its March low. The MACD oscillator is trying to signal a cover shorts buy.

In this Point and Figure chart of ACRGF, below, we can see that a decline to $18.00 will likely weaken this chart and a rally to $21 should strengthen it.

Bottom line strategy: Cannabis plays are likely to suffer with the broad market. Defer purchases for now.

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