The AdvisorShares Pure US Cannabis ETF (MSOS) soared 34% Thursday on the heels of President Biden's comments reviving cannabis legalization hopes. Let's check out the charts of the MSOS.
In this daily bar chart of MSOS, below, we can see a relentless decline the past 12 months. Prices failed to make any meaningful bounces. Trading volume never surged to show us a "throw in the towel moment." The slopes of the 50-day and the 200-day moving averages are negative (bearish).
The On-Balance-Volume (OBV) line has been in a downward trend until very recently. The 12-day price momentum indicator did not show us a bullish divergence with the downside move slowing.
In this weekly Japanese candlestick chart of MSOS, below, we can see the early start to some chart improvement. A large white (bullish) real body gets my attention. The 40-week moving average line is still negative but the weekly OBV line looks like it has made a higher low. The 12-week price momentum study shows that momentum has slowed.
In this daily Point and Figure chart of MSOS, below, we can see a potential upside price target in the $11 area.
In this weekly Point and Figure chart of MSOS, below, we can see a price target in the $5 area. Not out of the woods yet.
Bottom line strategy: After a long decline stocks typically need a period of repair and base building. The narrative on cannabis is changing quickly but the chart is still the chart. I would wait for a base to form before starting to build a long position.
