In this article, Mish Schneider, director of trading research and education at MarketGauge.com, explores the cannabis investing theme and its growth potential.
Cannabis stocks have seen a huge increase this year as US president Joe Biden took office.
Though it is not completely clear if the Federal government will push for widespread legalisation, its last bill to further decriminalise cannabis makes it easier for states to push their own legalisation agendas.
With 11 states making it available for recreational use, the trend has a lot more room to grow.
More importantly, the cannabis space has come off its highs and is now consolidating over a major moving average.
The above chart shows ETFMJ Alternative Harvest ETF [MJ], which holds both US and Canadian companies.
Back in late February, it put in highs around $34 before proceeding to see a 40% plus correction down to the $19 area.
While this is a decent pullback, MJ never closed underneath its 50-day moving average (DMA).
From a technical standpoint, this looks good as the brief dip under the 50-DMA was never revisited.
The only caveat is found on the weekly chart.
The 200-weekly moving average (WMA), shown by the green line, is currently at $25.10.
This is a pivotal level for price to clear or fail tomorrow.
If this price level can’t be cleared it may take more time and consolidation between the 50-DMA and the 200-WMA before the move upwards is ready.
Luckily, the momentum is leaning in a break of resistance as the both the 50- and 200-DMAs are sloping up.
This article was originally published on MarketGauge. With over 100 years of combined market experience, MarketGauge's experts provide strategic information to help you achieve your investing goals.