Canopy Down 50% from 52-Week High – Buy or Sell?

Green Stock Chart

If you like 50% off coupons, it’s time to look at the world’s largest cannabis company.

This early industry leader is poised to dominate the global cannabis market as the industry explodes in the next few years.

It is the only company in the industry to sign a multi-billion dollar partnership with one of the largest alcohol companies in the world.

Shares are up more than 1,000% in last three years.

Shares are currently on sale – trading at 50% below the 52-week high.

Today I am going to reveal what happened the last time shares fell 50% and what I expect this time around.

Canopy Growth Corp (WEED, CGC) is the world’s largest cannabis company. Headquartered in Canada, Canopy has a market cap of $8 billion and is in position to dominate the global cannabis industry in the next five years.

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In 2018, Canopy landed a $4 billion investment from Constellation Brands (STZ), one of the largest alcohol companies in the world.

Canopy is using that huge investment to fuel future sales growth, expanding its global footprint with a string of acquisitions and internal projects.

Canopy’s early industry leadership has paid off nicely for early shareholders. Shares are up 1,200% since January of 2016. You can see that in the weekly chart below.

What you can also see is that after an amazing run higher, Canopy is down 50% from its all-time high.

Canopy has fallen sharply after two news events:

  • CEO was fired.
  • Disappointing second-quarter earnings.

Just like any young company in a high-growth industry, Canopy is experiencing some growing pains.

In the short run, it has weighed on shares.

However, in the long-run, it has created a rare opportunity in Canopy.

This is an opportunity for investors and traders to buy shares when they are trading at a deep discount to the 52-week high.

Canopy Is Due for an Enormous Rally

According to history, Canopy is due for an enormous rally any day now. Here’s why.

#1 – Canopy shares are the most oversold they have ever been. The relative strength index, a technical indicator that signals when a stock is overbought or oversold, shows that Canopy is the most oversold it has ever been.

#2 – The last two times Canopy was even close to being this oversold, shares posted a huge rally in the coming months.

You can see that in the chart below circled in red.

Fundamental Catalysts for Canopy

Beyond the bullish signals on the chart, I also see a few fundamental catalysts.

Canada’s Cannabis 2.0

Cannabis extracts such as edibles and oils go legal in Canada in December. Analysts are expecting this to double the size of the Canadian recreational cannabis market, adding around $2.5 billion in annual sales. This should give Canopy’s revenue a big boost in 2020.

Canopy’s New CEO

Canopy is hunting for a new CEO right now. When they announce the position has been filled, I expect it to give shares a jolt.

Between the bullish signals on the chart and these two fundamental catalysts, Canopy looks overdue for a big rebound.

The Big Picture on Canopy

Canopy has delivered enormous gains in the last three years.

With shares up more than 2,000%, it was intimidating for new investors to jump in. Today, investors interested in Canopy have a rare opportunity to buy shares while they are down 50% from the 52-week high.

Although this may not be the exact bottom of the move lower, I see signals on the chart and two fundamental triggers that tell me Canopy is overdue for a big rebound and rally.

Michael Vodicka owns shares Canopy Growth Corp (CGC).

About the Author

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.