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Canopy Growth Stock in Key Area on Chart - Here's How to Trade It

Canopy Growth stock is struggling with multiple layers of resistance - and it's near support, too. Here's how to trade it.

Cannabis stocks have been volatile this year, which comes as little surprise given what the first few months of 2020 have brought us.

Canopy Growth  (CGC) - Get Canopy Growth Corporation Report is no exception, particularly since many view it as the industry leader. The group will again be in focus on Monday after the close as Tilray  (TLRY) - Get Tilray, Inc. Report is set to report earnings.

Also bringing a focus on the group is the beer, wine and liquor producer Constellation Brands  (STZ) - Get Constellation Brands, Inc. Class A Report, which recently lifted its stake in Canopy to 38.6%.

While Constellation may not mind boosting its stake, that doesn’t necessarily mean retail investors should be piling into the Smith Falls, Ontario, cannabis company. 

Let’s take a close look at the charts to see what's going on. 

Trading Canopy Growth Stock

Daily chart of Canopy Growth stock.

Daily chart of Canopy Growth stock.

In late April, Canopy stock popped 17% in a two-day span. But the shares ran right into resistance, which came into play from the declining 100-day moving average and prior range support near $17.50. The 50% retracement for the 2020 range came into play in this area, too.

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Since being rejected, Canopy Growth stock has faded over the past few weeks. There are some positives, though.

First, Canopy is putting in a series of higher lows since it bottomed in March. Second, the shares continue to hold up over the 50-day moving average.

From here, the bulls must be nimble. A drop below the 50-day moving average would be concerning, particularly with the recent weakness in the stock price. A close below the 50-day moving average could push Canopy Growth stock down to the 23.6% retracement near $13.

However, if shares can hold support near current levels and reclaim the 38.2% retracement, then the bulls can see a larger rally.

Specifically, it could send Canopy Growth stock up to the prior resistance zone, which is the 100-day moving average, $17.50 level and downtrend resistance (blue line). 

Over this zone and the declining 200-day moving average is in play. Above that and $22.50 is on the table.

For now, keep it simple. Above the 38.2% retracement is more bullish. Below the 50-day is more bearish.