Excusing my lame pun, this area has been attracting a lot of interest this year with a plethora of OTC stocks exploding briefly higher as the forum and chat rooms light up to the next stock that’s gonna get high. Well as N.W.A. and Ice Cube famously said “ Don’t get High on your own Supply” so it’s worth taking a sober look at what has been going on and seeing whether there are any marijuana stocks opportunities out there.
The firstpart of the Marijuana Stocks report looks at stocks that are traded on the mainstream so have a more vigilant regulation and are less likely to run off with your stash.
First up is Zynerba Pharmaceuticals (ZYNE). Out of the entire Biotech sector of 427 stocks this is the strongest on a Relative Strength basis so it’s smoking. This is not surprising in some ways as it is currently within its Phase 2 clinical trials. For reference Phase 2 normally sees the strongest performance in share price as word gets out after a successful Phase 1. Phase 1 often has an explosive move that peters out, whilst Phase 3 has a slower rally as the trend higher matures. All phases can end at any time so be under no illusions to what the risks can be if the trail fails and is the same for Marijuana Stocks.
Looking at their valuation it’s nowhere near as hallucinogenic as I’ve seen on other drug stocks at $300 million, and as its trial is for the treatment of Epilepsy and Osteoarthritis which are mainstream and probably large markets.
For the purposes of this analysis I’m going to concentrate on three of our studies within the Trade Safely farm that concentrate on support and resistance. These mark and create places of interest and in some cases targets. It is critical that you respect these points as if they fail on a closing basis they create your stop loss point.
The first and second are called Expansion and Energy and qualify fractals or swing points based on range and volume. At each point that a fractal occurs it measures it against the last 1000 bars of previous fractals and will only change in value when a pre defined limit of increased activity occurs. This means the lines can stay horizontal for some time and use weekly and monthly data superimposed on a daily chart.
The third is called Time Area and this creates fixed points of support and resistance, targets and identifies where stocks have space to move to up or down. They reference monthly up to annual data if the stock has been active long enough.
Returning to ZYNE yesterday price action saw price break out above the final resistance created earlier in the year and now has no resistance. The points where the breakout is false are also very clear as on the chart itself support (Blue line) has been steadily rising with the trend and is now at $18.33. Time Area showed that price held the Quarterly support (purple line at $19.78 and creates a higher support point. Daily or weekly closes below that lower level damage the trend and leave support way down at $11.77 and below $5.00 so vigilance on any break below the nearest levels is required.
The Next of the Marijuana Stocks is GW Pharmaceuticals (GWPH) and this is a stock whose valuation is as high as a someone whose just stumbled across a mountain of Crack whilst on Angel Dust. On sales of just $2.7 million it’s valued at $3 billion!!! Therefore you have to do your own due diligence on what justifies this, but again it is developing for cancer, multiple sclerosis and other ailments. The likelihood is that the sales it has posted are simply royalty payments for reaching certain Phase milestones.
Looking at the chart it has been trapped for some time and is firmly bounded within that pattern. However, there is a confluence of strong support between Energy and the Semi Annual Time Area (Brown line) between $108.75 to $106.50. Breaks below here leave the next support distant at $86.95 which represents the final line in the sand. For the stock to get bullish it needs a weekly close above the $140 point.
Americann Inc (ACAN) is involved on the administrative side of the industry providing consultancy, design, construction and financial services to approve and licence Marijuana Operators. So far it has been posting big losses so maybe it keeps forgetting to send out invoices. Volume is very low so care needs to be taken but once again Energy and Time Area create a zone of support between $3.72 to $3.25. Closes below there mean the parties over targeting a slide back to $2 at least. If buying strength it needs a weekly close above $5.50
Notis Global (NGBL) markets its patented Medbox systems that Dispense Herbal and Prescription medications based on Fingerprint I.D. Whilst volume is huge its valuation is just $1.4 million which may have something to do with the last headline story I found on the stock. “Sec charges Marijuana Company Medbox and Founder in Pot Stock Scam!!!” http://www.marketwatch.com/story/sec-charges-marijuana-related-company-with-touting-bogus-revenue-2017-03-09?siteid=yhoof2&yptr=yahoo I don’t know, you just can’t trust drug dealers!
With a share share price at 0.0002 it is already at rock bottom, but what has alerted me is how the stock performed last year. Time Area bottomed out as all time periods went to the same value before a brief explosion higher albeit of 100’s of percent. It now finds itself sporting the same pattern, but obviously it is and all or nothing investment.
Vape Holdings (VAPE) designs, distributes and markets E Cigarettes and Cannabis Vaporization products. Sounds promising but closer inspection suggests that no results have been posted since 2015 when losses where huge. However the chart is interesting and the recent slide saw price perfectly hold the Monthly Energy line at 0.0058 which provides a clear stop loss point if price closes below that point. Time Area is also flat and the upside target distant at 0.02 for a 150% gain if reached.
In our Next Report we will look at Marijuana Stocks in the OTC Section.
Please note this is general advice from Trading Safaley for all our clients and has been prepared without taking into account your personal objectives, financial situation or needs. If you do wish to consider acting on our information please contact a licensed financial advisor to discuss the appropriateness of this recommendation for your own personal financial circumstances. Please obtain any relevant product disclosure documents before deciding to invest. Trading derivatives, stocks and CFDs can lead to losses greater than your deposit.