The Bottom Line:
- Cannabis stocks experiencing a 30-40% drop in the last five weeks, despite bullish news in the sector
- Technical analysis reveals red flags and potential for a pullback, highlighting its usefulness as a tool for traders
- MSOS breaking monthly uptrend, currently at the lowest level in 2021, with next support at $5.99
- Example trade setup: Scaling back positions for a weekly bounce if MSOS breaks $7 into daily oversold
- Focusing on individual names like Trulieve for potential Florida catalyst and Green Thumb as the strongest in the sector
Technical Analysis Reveals Red Flags and Potential Pullback
MSOS Breaks Monthly Uptrend, Signaling Potential Pullback
MSOS is currently breaking the monthly uptrend, having lost the monthly higher lows that took around six months to develop. This is a significant step back for the sector, as it now stands at the lowest level seen in 2024, with no green on the year. The fact that cannabis stocks are flat on the year, despite the broader market’s strong performance and the bullish news catalysts, is a frustrating situation for investors. The next support level to watch for MSOS is at $5.99, and while a short-term bounce is expected, traders should be on the lookout for a weekly lower high formation.
Daily Timeframe Analysis: $8 Resistance and Oversold Conditions
On the daily timeframe, MSOS has clearly established $8 as the new resistance level, with numerous rejections occurring between $7.93 and $8.12 over a two-week period. This sideways action represents a balance between supply and demand, followed by a bearish shift as supply wins the battle, leading to another leg down. Currently, MSOS is back to daily oversold conditions, which is the first occurrence since the bottom following the initial run-up on the HHS announcement. This oversold status has sparked some interest among traders, as it may present an opportunity for a short-term bounce.
Trading Strategy: Scaling Back Positions for a Weekly Bounce
Given the current market conditions, one trading strategy is to scale back positions in anticipation of a weekly bounce if MSOS breaks $7 into daily oversold territory. This approach involves nibbling back a portion of previously sold positions, focusing on strong individual names like Trulieve (TCNNF) and Green Thumb Industries (GTBIF). By entering at extreme oversold levels, such as when multiple timeframes show crushed RSI values (known as a super stack), traders can position themselves for a high-probability short-term bounce. However, it’s crucial to manage risk by selling partial positions into strength and setting appropriate stop-loss levels to protect against further downside.
MSOS Breaks Monthly Uptrend, Hits Lowest Level in 2021
MSOS Breaks Monthly Uptrend, Hits Lowest Level in 2021
MSOS is currently breaking the monthly uptrend, having lost the monthly higher lows that took around six months to develop. This is a significant step back for the sector, as it now stands at the lowest level seen in all of 2021, with no green on the year. The fact that cannabis stocks are flat on the year, despite the broader market’s strong performance and the bullish news catalysts, is a frustrating situation for investors. The next support level to watch for MSOS is at $5.99, and while a short-term bounce is expected, traders should be on the lookout for a weekly lower high formation.
Daily Timeframe Struggles: $8 Resistance Proves Challenging
On the daily timeframe, MSOS has clearly established $8 as the new resistance level, with numerous rejections occurring between $7.93 and $8.12 over a two-week period. This sideways action represents a balance between supply and demand, followed by a bearish shift as supply wins the battle, leading to another leg down. Currently, MSOS is back to daily oversold conditions, which is the first occurrence since the bottom following the initial run-up on the HHS announcement. This oversold status has sparked some interest among traders, as it may present an opportunity for a short-term bounce.
Positioning for a Potential Bounce: Risk Management is Key
Given the current market conditions, one trading strategy is to scale back positions in anticipation of a weekly bounce if MSOS breaks $7 into daily oversold territory. This approach involves nibbling back a portion of previously sold positions, focusing on strong individual names like Trulieve (TCNNF) and Green Thumb Industries (GTBIF). By entering at extreme oversold levels, such as when multiple timeframes show crushed RSI values (known as a super stack), traders can position themselves for a high-probability short-term bounce. However, it’s crucial to manage risk by selling partial positions into strength and setting appropriate stop-loss levels to protect against further downside.
Scaling Back Positions for Weekly Bounce: An Example Trade Setup
Positioning for a Potential Bounce: An Example Trade Setup
In anticipation of a potential weekly bounce, one trading strategy is to scale back positions if MSOS breaks $7 into daily oversold territory. This approach involves nibbling back a portion of previously sold positions, focusing on strong individual names like Trulieve (TCNNF) and Green Thumb Industries (GTBIF). By entering at extreme oversold levels, such as when multiple timeframes show crushed RSI values (known as a super stack), traders can position themselves for a high-probability short-term bounce.
For example, if MSOS breaks $7 on a Friday, a trader might consider nibbling back 25% of what was sold a month ago, with a preference for TCNNF and GTBIF. If the entry coincides with the low of the day, the trader can have high confidence in their short-term technical analysis, even if they are less certain about the trade playing out favorably over the next three weeks.
Managing Risk: Selling Partial Positions and Setting Stop-Losses
As the bounce plays out, traders should remind themselves that they are looking for an hourly oversold bounce and an hourly lower high. Protective bounce traders should consider selling partial positions, ideally with a break-even stop under the low of the day. For the bounce to follow through, an hourly trend change would be needed, and a pullback of more than 50% would be less favorable for the bulls.
In the example trade, if the trader buys at $8.66 and sells half at $8.92, their break-even point is now $8.40. From here, they have two options: exit the trade if $8.40 is hit, as the hourly uptrend they were looking for has not materialized, or give the bulls some wiggle room by placing a stop under $8.20, risking a small percentage on the remaining position.
Adapting to Market Conditions and Letting Trades Play Out
While the trader may end up with a green position, giving back most of the gains and potentially stopping out, this approach allows for positioning in a low-risk, high-reward scenario. The trader can apply this mindset to various timeframes, such as the Microsoft trade near the $222 bear market lows, where they sold a portion and let the rest of the position play out without being stopped out.
In an ideal world, the trader would hope for a weekly bounce to materialize, but market conditions may not always align with expectations. By adapting to the current market environment and focusing on strong individual names like TCNNF and GTBIF, traders can position themselves for potential opportunities while managing risk effectively.
Trulieve’s Potential Florida Catalyst in Focus
Trulieve’s Potential as a Leading Florida Cannabis Company
Trulieve (TCNNF) is one of the strongest individual names in the cannabis sector, making it a focus for traders looking for potential opportunities in the coming months. As a leading cannabis company in Florida, Trulieve has established a dominant market position and has consistently demonstrated strong financial performance. The company’s vertical integration strategy, which includes cultivation, processing, and retail operations, has allowed it to maintain control over its supply chain and product quality.
Catalyst for Growth: Florida’s Expanding Cannabis Market
Florida’s medical cannabis market has been experiencing significant growth, with an increasing number of registered patients and a growing demand for high-quality cannabis products. Trulieve has been well-positioned to capitalize on this growth, thanks to its extensive retail presence and strong brand recognition within the state. As the Florida market continues to expand, Trulieve’s potential for further growth and market share gains remains promising.
Trulieve’s Financials and Future Outlook
Trulieve has consistently reported impressive financial results, with strong revenue growth and profitability. The company’s focus on operational efficiency and its ability to scale its business has contributed to its financial success. Looking ahead, Trulieve’s potential for continued growth in Florida, as well as its expansion plans into other key markets, positions the company as an attractive option for investors and traders seeking exposure to the cannabis sector. As the regulatory landscape continues to evolve and the demand for cannabis products grows, Trulieve appears well-prepared to navigate the challenges and opportunities that lie ahead.
Green Thumb Remains Strongest in the Cannabis Sector
Green Thumb Industries: A Standout Performer in the Cannabis Sector
Green Thumb Industries (GTBIF) has emerged as one of the strongest individual names in the cannabis sector, making it an attractive option for traders and investors looking to capitalize on the industry’s potential. The company’s impressive performance can be attributed to its strategic approach to growth, focusing on key markets with favorable regulatory environments and strong consumer demand. Green Thumb has established a significant presence in several states, including Illinois, Pennsylvania, and Nevada, where it operates a combination of retail stores and cultivation/processing facilities.
Solid Financials and Expansion Plans Drive Green Thumb’s Success
Green Thumb’s financial results have been consistently strong, with the company reporting substantial revenue growth and improving profitability. The company’s ability to effectively manage its operations and maintain a disciplined approach to capital allocation has been a key factor in its success. As Green Thumb continues to expand its footprint across the United States, it is well-positioned to benefit from the ongoing legalization trend and the increasing acceptance of cannabis products among consumers.
Green Thumb’s Brand Portfolio and Product Innovation Set It Apart
One of Green Thumb’s key strengths is its diverse portfolio of cannabis brands and products, which cater to a wide range of consumer preferences and needs. The company has successfully developed and marketed several popular brands, such as Rythm, Dogwalkers, and The Feel Collection, which have gained significant traction among cannabis enthusiasts. Additionally, Green Thumb’s focus on product innovation and quality has helped it differentiate itself in an increasingly competitive market, ensuring that it remains at the forefront of the industry’s growth and evolution.
