The cannabis stocks have gotten a lot riskier in 2019, Jim Cramer cautioned viewers last night on his "Mad Money" program. Last year, these stocks traded on hope and dreams, but this year, investors want results and they're simply not getting them.
Take for example CannTrust (CTST) , which has seen its shares tumble 75% from their highs in 2018 after Canadian regulators deemed the company's facilities non-compliant, with allegations of malfeasance. CannTrust had billed itself as a dependable producer of cannabis that could provide constant dosages for medical applications. Instead, the company has found itself mired in regulatory delays, pricing pressures and a failed secondary offering of stock. CannTrust's CEO was recently ousted and the company's chairman resigned.
A lot of bad news -- let's see if the charts and indicators are anticipating any good news.
In this daily bar chart of CTST, below, we can see that prices have been in a downtrend the past 12 months. Prices are trading well below the declining 50-day simple moving average line as well as the slower-to-react 200-day moving average line. In late May we can see the 50-day line cross below the 200-day line for a bearish dead or death cross. Trading volume has been increasing on the decline from April, telling us that sellers are voting with their feet and the decline in the On-Balance-Volume (OBV) line tells me that sellers are more aggressive with heavier volume seen on days when CTST has closed lower.
In this weekly bar chart of CTST, below, we can see about two years of price history. Prices are below the declining 40-week moving average line. A large top pattern can be seen between $5 and $12 and the break below $5 is very bearish. The weekly OBV line is bearish and the 12-week price momentum study does not show that the sell off is slowing.
In this Point and Figure chart of CTST below, we can see the big decline and a recent small bounce. If CTST is going to make a come back it will need a long sideways repair process.
Bottom line strategy: There is no technical reason to go long on CTST. I repeat, there is no reason to buy CTST. Move on.
