Canopy Growth Corp (TSE:WEED) and Aurora Cannabis Inc Wrestle With 50-Day MA; Sector Direction at Stake

Benjamin A. Smith
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Canopy Growth Corporation (TSE:WEED) (OTCMKTS:TWMJF) (FRA:11L1) is widely regarded as the undisputed cannabis leader on the S&P/TSX Composite Index (INDEXTSI:OSPTX), but Aurora Cannabis Inc  (TSE:ACB) (OTCQB:ACBFF) (FRA:21P) is always nipping at their heels . As the sector’s most capitalized companies, how they perform often presages the direction of the cannabis sector at-large. Thus, if the current battle for Canopy’s 50-day MA is any indication, cannabis stocks may be on the cusp of breaking out from its recent rudderless direction.

Canopy Growth CEO Bruce Linton stopped by Midas Letter studios earlier this month to talk about the state of the cannabis union in Canada.

As we can see from the chart below, Canopy Growth is hugging the widely-followed 50-day MA (blue) line. This demarcation point is often seen as a key barometer of near-term trading sentiment. While it wouldn’t provide a definitive “all clear” signal, a surge (and hold) above this mark would provide an important clue that other cannabis stocks could soon follow.

Keep in mind that Canopy Growth is outperforming the cannabis Life Sciences sector today. The company is currently higher 3.49%, up $1.09 to $32.30/share versus a paltry 0.79% generated by the benchmark Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ). Soon to be co-market cap leader Aurora Cannabis Inc  (TSE:ACB) (OTCQB:ACBFF) (FRA:21P) is weighing on HMMJ, currently lower (2.13%) to $11.01/share.

Also notable today is the strong upward upward momentum right near the weekly high. A decisive close above $32.50 would suggest bulls are gaining the upper-hand (although I would suggest that price action only starts to get exciting over about $33/share or so). Again, this doesn’t necessarily suggest investors go all-in, but it does provide solid indication that the market may be itching to move higher.

Please note, the 50-day technical breach becomes much more valid if accompanied by ancillary catalysts or volume. Canopy Growth’s price action has not been accompanied by such events this week.

However, certain catalysts are fast approaching which could shatter the status quo relatively soon. Whether that’s the soon-to-be Green Organic Dutchman IPO, or Canopy’s impeding listing on NASDAQ, or the Aurora-CanniMed merger finalization, we can’t be sure. All we can say is that Canopy’s strong price action at the 50-day MA may be providing a clue that the next catalyzing event is close at hand.

With the sector grinding in meandering fashion for the past several sessions, we’ll take any valid signal we can come by.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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