In another of the "Executive Decision" segments of Mad Money Tuesday night, Jim Cramer welcomed back David Klein, CEO of Canopy Growth Corp. (CGC) , the Canadian cannabis grower.
Klein had positive things to say about Quatreau, his company's first CBD-infused beverage. He said sales are off to a brisk start and Canopy is using the experience to "test and learn" how they will market drinks like these in the U.S.
Canopy's "secret sauce" is their partnership with Constellation Brands (STZ) , Klein explained. His company is leveraging Constellation's production and distribution capabilities to bring products to market at scale where others simply can't.
Shifting the focus to the U.S., Klein said the trend towards legalization for cannabis continues, and he's confident that through increased education and awareness, everyone will have a good experience with cannabis products. In the meantime, Canopy is focused on operating a profitable business so they will not be seen merely as a speculative company.
We looked at CGC one month ago and wrote, "Continue to hold long positions from previous recommendations. Raise stop protection to $35 from below $30. Our new price objectives are $48 and then $56."
Prices did reach our $56 second price target so I will assume that traders took profits last month into strength.
In this updated daily bar chart of CGC, below, we can see that prices have pulled back from their big October-February rally. CGC is testing the rising 50-day moving average line. The 200-day moving average line has a positive slope and intersects around $23.
The On-Balance-Volume (OBV) line shows strength into early February followed by some weakness. The Moving Average Convergence Divergence (MACD) oscillator has crossed below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of CGC, below, we can see a large upper shadow above $45 telling us that traders rejected those prices. Prices are still above the rising 40-week moving average line and have yet to retest the likely support zone in the $30-$25 area.
The OBV line has been moving higher from October 2019 but recently shows some weakness. The trend-following MACD oscillator has narrowed and could cross to the downside in the weeks ahead giving us a take profit sell signal.
In this daily Point and Figure chart of CGC, below, we can see that the software is projecting a potential upside price target in the $45 area. A trade at $31.33 will weaken the chart picture.
In this weekly close only Point and Figure chart of CGC, below, we can see that a possible $58 price target is projected.
Bottom line strategy: I assume that traders used the rally to take profits and are now flat or at least less long. I would recommend buying CGC again but I don't think its pullback/correction is over. We could see a test of the $30-$25 support zone in the days and weeks ahead. Have patience.
