Why Canopy Growth Stock Looks Headed Toward A Reversal As MORE Act Advances Through The House

Despite the growing movement toward legalization, cannabis stocks have been unable to catch a break. Canopy Growth Corporation CGC may have confirmed the bottom is finally in, however.

The House Judiciary committee on Thursday approved a bill aimed toward federally legalizing cannabis use. The Marijuana Opportunity, Reinvestment and Expungement (MORE) Act will now move to a full house vote, which is expected to pass, before heading off to the Senate.

So far President Joe Biden has stood firmly against federal cannabis legalization while remaining open to individual states forming their own cannabis laws.

Today, two Pennsylvania state legislators introduced a bill to legalize cannabis in the Commonwealth. If passed Pennsylvania would join 18 states and the District of Columbia in allowing recreational use.

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The Canopy Growth Chart: Canopy Growth has been trading in a step downtrend between two parallel lines, making lower highs and lower lows since June 9. A falling channel is considered to be bearish until a stock breaks up from the descending upper trendline of the pattern.

Canopy Growth has so far failed to make a lower low below the $13.35 level, however, which indicates the downtrend may be over.

On Thursday Canopy Growth tested the support level and bounced. The bounce up from the level created a bullish triple bottom pattern on the daily chart when paired with two other tests of the support level on Sept. 20 and Sept. 21.

The stock looked to be printing a bullish hammer candlestick on Thursday, which is another sign a reversal to the upside may be in the cards. Higher prices on Friday will be needed for confirmation the pattern was recognized.

Canopy Growth is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The stock is also trading below the 200-day simple moving average, which indicates overall sentiment Canopy Growth is bearish.

• Bulls want to see big bullish volume come in and break Canopy Growth up from the falling channel pattern, which will allow the stock to regain the support of both the eight-day and 21-day EMAs as well as a resistance level at $14.98. Above the level, there is a higher resistance at the $16.27 mark.
• Bears want to see big bearish volume come in to the stock to drop it down below the $13.35 area, which would confirm the downtrend is still intact. Below the level, Canopy Growth has support at $11.30.