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RodDavid
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I developed analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. I primarily apply my technique to analyzing S&Ps, generating several round-turn candidates daily. The methodologies are also applied to... More
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Rod David
  • Obama Comments Could Start Another Bowl Ralling In Marijuana Stocks 0 comments
    Jan 21, 2014 7:46 AM | about stocks: EDXC, MCIG, PHOT

    This weekend brought a couple of interesting developments for the marijuana theme. First, and not necessarily jokingly, is that both Super Bowl competitors come from the only two states to have decriminalized marijuana. I don't know which team brings it, but I smell a 42-0 blowout in the air.

    On a slightly more serious note, President Obama being interviewed in The New Yorker encouraged marijuana legalization.

    The Super Bowl news has no direct impact. But it's sure to be referenced next weekend, and every reference is a step closer to normalization. Obama's interview comments, however, are reminiscent of Eric Holder's August 11 speech to the ABA. It was widely interpreted as signaling DOJ's intent not to interfere with recently passed state decriminalization statutes. Several higher-profile marijuana stocks gradually rallied as the news dissipated.

    Holder's comments snuck up onto a market that had only pockets of euphoria following the states' votes. Obama's comments will hit Tuesday's market following widespread rallies among every sector participant. Most of the rallies were measurable by triple-digit percentages. Even companies that had no more than a press release mentioning marijuana were surging. It was silly. But that leg peaked a week ago, and many of the New Year's rally premiums have retraced a healthy 50% or more of their surges. That makes them vulnerable to resuming their rallies.

    So, if the interview doesn't incite noteworthy rallies among marijuana stocks on Tuesday, then that should be considered bearish. That's how likely it is to have a bullish reaction. Stocks that have maintained their first day's reaction by week's end are probably self-qualifying as legitimate sector participants.

    Following are several charts within the sector. As a reminder, let me state again in no uncertain terms my hatred for so-called penny stocks. From their Mack Truck sized spreads and illiquid environments, to their legacies of hype and manipulation. No opinion can be better than the chart data's integrity. There's also something both unnerving and off-putting about calculating price levels in tenths of a cent.

    As another reminder, let me repeat that I am a technician, analyzing only the chart. Open, high, low, close and volume -- my opinion is exclusive to those data and to the patterns they may form. My opinion does not speak to capitalization, revenues, expenses, competitive factors, etc. Average volume must have set a pace that enables a more reliable price discovery, as opposed to sporadic volume that may be prone to manipulation. Trading history must also be so extensive as to include enough separate cycles, and not just a brief or consistent trend.

    Finally, I currently own three stocks in the sector (EDCX, MCIG, PHOT) whose charts were the most attractive to me at the time of purchase, and their stories made sense. None of which is to be misconstrued as a recommendation to purchase any of these stocks, now or ever.

    The following coverage is presented alphabetically. The "recent upleg" is provided as reference for the sort of elasticity each stock is currently absorbing. The first pullback limit ("pb limit 1") is the optimal endpoint before launching a subsequent upleg. Closing back under the second pullback limit ("pb limit 2") would suggest much more delay before rallying again, if ever. Closing above the "continuation" level on expanding volume should be noticeably obvious that a new upleg is underway. The "pattern" type is in reference to my own labeling, which may not share the mainstream definition.

    Coverage accompanying 1-21-14 article

    Disclosure: I am long EDXC, MCIG, PHOT, .

    Themes: Marijuana Stocks: EDXC, MCIG, PHOT
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