Cannabis stocks have been heating back up lately and they were thrust firmly into the spotlight on Wednesday.
Aphria shares were up about 4% in response, while Tilray stock has erupted about 24% on the day.
It’s got investors taking a closer look at the cannabis space, and more specifically which stocks might be next in an M&A scenario.
Once a red-hot investment area, the cannabis space lost most of its luster once the hype died down.
Various catalysts remain in the pipeline - like legalization in states like New York and potentially at the federal level - although bulls have seemed reluctant to really bid the group higher in a sustainable fashion.
Let’s look at the group more closely.
Trading Canopy Growth
However, it’s not as small as many of its peers and with Constellation Brands (STZ) - Get Constellation Brands, Inc. Class A Report owning such a significant portion of the company, that is likely the only suitor that could acquire Canopy at this point — if that’s even on the table.
We can’t control that, but we can control how we trade it.
On the weekly chart, shares are struggling near $28.50, but the stock is holding the 100-week moving average and the prior 2020 high from January as support.
A weekly close below the 200-week moving average near $23.80 really takes the air out of the bullish setup. On the upside, clearing the November high at $29.52 opens the door to $30-plus and could put the 161.8% in play near $36.50.
Trading Aurora Cannabis Stock
With its much smaller market cap, Aurora Cannabis (ACB) - Get Aurora Cannabis Inc. Report could find itself on the right site of potential M&A chatter. However, until lately the stock has traded quite poorly.
For now though, shares are holding the 21-day and 200-day moving averages as support, as well as a key VWAP mark (volume weighted average price). Below last week’s low at $9.25 and Aurora will break below all of these support marks, ruining the long setup unless these marks are quickly reclaimed.
A move over downtrend resistance and Wednesday’s high at $10.49 puts the December high in play at $12.19, followed by the November high at $14.48.
Trading Alternative Harvest (MJ) ETF
After a strong pop in early November — due to the election — shares continued to power higher into December. That led to a great little bull-flag pullback to the 21-day moving average.
Seeing some continuation higher on Wednesday, bulls are looking for a rotation higher.
If the stock can clear this month’s high at $16.26 and fill that last remaining gap from February at $16.37, it could put the 2020 high in play all the way up at $19.32.
A rotation below this weekly low at $14.59 could trigger a move down to the 50-day and 200-day moving averages.