Canopy Growth ended the year down 21.5% but that does a very good job of masking the true pain. Despite the recent rally - and recall that the stock rallied 12.5% on the last trading day of 2019 - Canopy still finished the year 59.5% below its high in May.
Even more startling, that was among the best performance vs. its peers like Cronos Group (CRON) - Get Report and Aurora Cannabis (ACB) - Get Report. Aphria (APHA) - Get Report, down about 50% from its highs, was one of the few that did better, if we can call it that.
Making it all that much more painful is the fact that the market indices did so well in 2019, with the S&P 500 rallying almost 30%.
In any regard, many investors are looking at the washout in cannabis stocks and wondering if the latest rally is a dead cat bounce set to lead to more losses or if momentum is set to return to the group.
Let’s look at the charts for Canopy Growth stock.
Trading Canopy Growth Stock
While a stock chart is a glimpse into the past, it also provides clues to what the future may hold. Any technical analyst will tell you the caveat that, just like with fundamental analysis, their work does not predict the future. But based on what developments are occurring, it’s their best guess as to what will happen going forward.
With that in mind, Canopy has gone from bad to OK. With that transition, bulls will further look for a move from OK to good; then potentially good to great.
Canopy Growth was trapped in a nasty downtrend (blue line), which had weighed on the price for months on end. In November, the floor gave out, and shares crashed 36% in just seven trading days. CGC stock then rebounded 55% in three days!
The word volatility seems like an understatement in this instance.
In any regard, Canopy Growth stock eventually pushed through downtrend resistance. Its latest rally thrust shares over the 20-day and 50-day moving averages as well. This is where we’re seeing the positive developments.
Canopy is over several major moving averages, is holding up over critical support near $17.50 and has now put in a higher low (purple arrows). Bulls will eventually want to see CGC stock close above $22.50, which could trigger a 10% to 20% rally up to the $25 to $27.50 area.
Should Canopy Growth stock break below its key moving averages and break its trend of higher lows, it is critical it stays above $17.50. Below this area could put its 2019 lows on the table.
Short of that type of breakdown though, Canopy Growth has the look of a rebound setting up.