Canopy Growth (CGC) stock has been on solid decline since February, falling from the high of $3.22. The stock price entered a robust bullish momentum after the formation of support at $0.3880 on 29th August. CGC stock price has surged roughly 384% and made a high at $1.92.
The stock price faced strong rejection near $2, which led to a correction. The stock price retraced and created a support at $0.76. For two days, Canopy Growth stock has been printing bullish candles.
If bulls push the price above $1, it might rise and retest the resistance level of $1.70. On the other hand, if the stock price falls below the recent support of $0.76, it might melt toward the next support level of $0.3880, from where the bullish rally started.
Reason Behind Rise and Fall in Stock Price
Canopy Growth stock has been on a roller coaster this month. The Cannabis stock gained significant ground in the last two weeks after a news release regarding U.S. regulators reclassifying marijuana as a Schedule III drug, down from its more highly regulated Schedule I status.
The proposed change would reclassify marijuana from a Schedule I to a Schedule III substance, where the Drug Enforcement Administration (DEA) says there is a “moderate to low potential for physical and psychological dependence.”
However, CGC stock entered a corrective phase after investors developed a negative sentiment in reaction to the news that Canopy Growth would sell stock in a private placement to raise as much as $50 Million for the company.
Private placements are not for the general public and are sold to accredited investors. Common stock shareholders’ ownership is diluted in the process.
Will CGC Stock Price Rise Toward $1.70?
The stock price has surged above 20, 50, and 100-day exponential moving averages, suggesting a rise in bullish momentum. The Chaikin money flow score is still above the 0 mark and stands at 0.03, indicating slight strength and capital inflow in the market.
The relative strength index has dropped near the 50 neutral mark and stands at 53.33, suggesting a rise in the participation of sellers. The Bollinger bands have expanded which indicates an increase in volatility.
Conclusion
The current gains can tempt investors to buy Cannabis stocks but the danger with the industry is that it is highly volatile, and things can change quickly. If the Drug Enforcement Administration decides against rescheduling marijuana; pot stocks could quickly give back these recent gains.
Technical Levels
Major support: $0.76 and $0.3880
Major resistance: $1.70 and $2.00
