Cannabis bulls will be discouraged to learn that TheStreet.com's quantitative service downgraded the stock of Canopy Growth Corp. (CGC) to a "Sell" rating Thursday. The stock has lost considerable ground in recent months and the slide does not look to be over just yet.
In this daily bar chart of CGC, below, we can see that prices have skidded lower from early May. CGC is below the declining 50-day simple moving average line and the bearish 200-day line.
The daily On-Balance-Volume (OBV) line has quietly and slowly drifted lower telling us that aggressive buying of CGC is absent.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has been below the zero line in bearish territory since late May.
In this weekly bar chart of CGC, below, we can see that prices may have made an irregular triple top pattern. CGC has broken its late 2018 lows and this can open the way to still further losses in the weeks ahead. Prices are well below the declining 40-week moving average line.
The weekly OBV line has been bearish for some time now as trading volume has been heavier on the weeks that CGC has closed lower, thus subtracting bigger numbers than seen on the weeks that CGC may have closed higher.
The MACD oscillator is bearish on this longer time frame.
In this Point and Figure chart of CGC, below, we can see what looks like a large distribution (selling) pattern with a lot of volume at higher levels and little at the lower levels. This can make a stock vulnerable to a big decline as underwater longs feel trapped with little support below the market.
Bottom line strategy: The long-term fundamentals of the cannabis industry may be very impressive but it does not pay to fight the trend.
