Canopy Growth Corporation (CGC) is an Ontario based company and leader in the cannabis sector. It recently received an analyst upgrade which is why it caught some attention. Analyst ratings are fundamentally based and often out of touch with the market in terms of price action but this analyst actually came out at a very convenient price.
From a technical stand point, the 24 level has been a historical support level, and happens to be about 50% off of the 50 area high. More importantly, what makes this idea attractive for a swing trade is the reward/risk.
Risk doesn’t have to be more than 2 or 3 points, while price can reasonably appreciate 2 or 3 times that amount of risk IF momentum picks up in this sector over the next couple of months.
In terms of recent price action, the cannabis sector has been forgotten about, and what I like to refer to as “hated”. Since the peak earlier in the year, this sector has gone out of favor very quickly and this is often where higher quality opportunities can be found in terms of swing trades.
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Here is the swing trade idea:
Buy Stop: 24.25
Stop Loss: 22
Target 1: 26.25
Target 2: 30.25
Target 3: 34.25
It is VERY important to respect the stop loss order because IF price is going to establish a potential trend higher, it has no business breaking lows at this point. While price can sometimes go slightly lower than the stop and then reverse, it is NOT worth assuming the extra risk. ESPECIALLY in this highly speculative and finicky sector.
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