The Current Cannabis Sector Rally Is Pointing To Another Breakout

By: Chris_Vermeulen

My research team and I continue to believe the Cannabis/Alternative sector is poised for a big trend in 2021 and 2022.  Over the past few years, this sector has continued to trend lower after the hype of 2016~2018 – back when everyone was getting into the Cannabis industry as multiple US states authorized recreational and medical use.  After the 2018 peak, followed by the early 2019 moderate price recovery, this entire industry sector fell out of favor with investors for almost 2 full years.

MJ Pennant Setup Almost Complete

The peak in the MJ, Alternative Harvest ETF, in September 2018 was $45.40.  The lowest price since that peak was in March 2020 at $8.81 – that’s an 80% decline in price.  Currently, MJ is trading near $22.31 and we’ve seen a tremendous recovery after the 2020 US elections.  These elections resulted in a wave of enthusiasm for Cannabis and Alternative supply companies as it was widely expected the Democrats would move quickly to legalize Cannabis and other illegal drugs after their win.

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Looking at the MJ Daily chart below, MJ has retraced and stalled into a Pennant/Flag formation that we believe may prompt another explosive upside price trend.  The Apex of any Pennant formation can be very volatile at times.  Traders need to be prepared for wild price action as we near this Apex date.  Yet, we believe the bias of the market, with a resurgence of the US economy and continued belief that the Democrats will attempt to push through Federal Cannabis legalization, may prompt another upside price wave.

A simple Fibonacci Measured Move of recent price action on this Daily MJ chart shows a potential for a minimum of +20% with a target near $27.18.  Other cannabis stocks may be setup for even bigger gains.

Aurora Cannabis May Breakout Above $11 Very Quickly

As we can see from the following Aurora Cannabis chart, which we highlighted in our Four Stocks To Own Before The US Elections follow up article, rallied from $3.71 to levels near $19 (a massive +423%) in just 4 months.  If a true Fibonacci Measured move takes place from recent price lows (near $8.95), then we believe another +150% rally may be setting up in ACB with a target price level near $17.76, then $23.35.  As amazing as that may seem, this won’t be happening overnight but rather is expected to unfold over the next weeks and months.

The rally in MJ could happen much quicker than the rally in ACB – yet both symbols seem poised for another upside price rally.  If the US reflation trade continues to push the general market rally higher and US states continue to gradually reopen for business as usual, Cannabis will continue to grow in revenues and activity.  The very deep contraction in this industry has barely just begun to reflect the projected growth over the next 5+ years. 

Don’t miss the opportunities in the broad market sectors over the next 6+ months.    Staying ahead of these sector trends is going to be key to developing continued success in these markets.  As some sectors fail, others will begin to trend higher.  Learn how BAN Trader Pro can help you spot the best trade setups. Learning to profit from these bigger trends and sector rotation will make a big difference between success and failure.  If you are not prepared for these sector rotations, then you can sign up now for my FREE webinar that teaches you how to find, enter, and profit from only those sectors that have the most strength and momentum. Staying ahead of sector trends is going to be key to success in volatile markets.

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Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

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