3 Cannabis Stocks Ready to Hit a New 52-Week High

I was a derivatives trader for a billion-dollar trading firm at the Chicago Board of Trade for three years in my late twenties.

It was a crazy job. My job was to make huge bets all day long in highly volatile markets.

The key to this position was the chart.

I would hunt for specific formations on the chart, looking for stocks, bonds, commodities, or currencies ready to break out into a new high or break down into a new low.

Once I found the right setup I would slap on million-dollar trades looking to “scalp” the market for a quick profit.

This is the insanity of short-term trading and why I am now an investment advisor. You have to be nuts to gamble like that all day. Investing is a thousand times easier than trading.

However, as an investment advisor and financial writer, my background in trading is a weapon.

It helps me see things in the market that a lot of other advisors and investors miss.

Right now, my background in trading and charts tells me cannabis stocks are about to break out into a new all-time high.

The North American cannabis sector has moved into a bullish formation on the chart that frequently leads to an upside breakout.

When I was a trader, this is exactly the kind of setup that would have gotten me excited about a fat winner.

The North American Cannabis Stock Index (MJIC) is in Breakout Formation

The MJIC North American Cannabis Stock Index has moved into a pennant formation on the chart.

This is a setup that frequently leads to a strong upside breakout.

Here’s how Investopedia defines a pennant.

“A pennant is a continuation pattern in technical analysis formed when there is a large movement in a stock, the flagpole, followed by a consolidation period with converging trendlines, the pennant, followed by a breakout movement in the same direction as the initial large movement, the second half of the flagpole.”

Take a look at the pennant formation in the MJIC North American Cannabis Stock Index below.

Chart courtesy of MarijuanaIndex.com.

This chart formation is important for two reasons.

First, I believe the entire North American cannabis sector is about to break out and hit a new 52-week high.

As you can see, it looks like the index is being squeezed and ready to pop. I think that’s exactly what’s going to happen. That means it could be a good time to buy or add cannabis shares before the sector pushes another leg higher.

Second, if the entire cannabis sector advances, I am expecting a smaller group of individual cannabis stocks to do even better.

For example, companies with strong revenue growth on the income statement and a great setup on the chart. Here are three of the best.

Canopy Growth Corp (TSX.TO: WEED)

Canopy growth Corp is the largest medical cannabis company in Canada. Canopy is already making moves to dominate the global cannabis industry. It recently launched a joint venture in Brazil and purchased a German dispensary for $7 million. On the chart below, you can see Canopy is also in a pennant formation. I am looking for Canopy to break the 52-week high in the next few months.

Chart courtesy of StockCharts.com.

Aurora Cannabis (TSX.V: ACBFF)

Aurora Cannabis is also one of the largest medical cannabis companies in Canada. Aurora is unique because it operates a legal monopoly. It is currently the only company with a license to produce and sell medical cannabis in Alberta, one of Canada’s largest provinces with a population of more than four million. On the chart below, you can see Aurora is also showing the pennant formation.

Chart courtesy of StockCharts.com.

GW Pharmaceuticals (NASDAQ: GWPH)

GW Pharmaceuticals is a U.K. based pharmaceutical company. GW is in hot pursuit of the first ever cannabis blockbuster with Epidiolex, a drug designed to treat epilepsy. Epidiolex is currently in Phase 3 FDA testing, the final stage before receiving final approval or denial from the FDA. GW is expecting a final ruling on Epidiolex by the end of the year. On the chart, GW is in breakout formation. I am expecting a new 52-week high.

Chart courtesy of StockCharts.com.

Action to Take

The entire cannabis stock sector looks like it’s about to breakout higher into a new 52-week high. If that happens, I am expecting these companies to lead the charge higher.

Disclosure: At the time of original publishing, Michael Vodicka owns shares of Canopy Growth Corp (WEED) and GW Pharmaceuticals (GWPH).