Trading Strategies For Canopy Growth Stock Before And After Q2 Earnings

Canopy Growth Corporation CGC is set to print its second-quarter earnings after the markets close Thursday. The stock was sliding over 9% heading into the event.

When Canopy Growth printed first-quarter earnings on Aug. 9, the stock plunged about 10% the following day. The stock then traded mostly sideways between 38 cents and 48 cents before skyrocketing about 400% between Aug. 29 and Sept. 12.

For that quarter, Canopy Growth reported sales of $90.16 million, which beat the analyst consensus estimate of $68.01 million.

For the second quarter, analysts, on average, estimate Canopy Growth will report a loss of 13 cents per share on revenues of $68.05 million.

From a technical analysis perspective, Canopy Growth’s stock looks bearish heading into the event, having recently confirmed a new downtrend. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

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The Canopy Growth Chart: Canopy Growth confirmed a new downtrend on Wednesday when the stock formed a lower high at the 64-cent level. On Thursday, the stock was reacting to the downtrend and falling further, losing support at the eight-day exponential moving average (EMA).

• If Canopy Growth receives a bullish reaction to its earnings print, the recent downtrend will serve as a bear trap and the stock is likely to regain the eight-day and 21-day EMAs. If Canopy Growth can remain above the 21-day EMA for a period of time, the eight-day EMA will cross above the 21-day, which would give bullish traders more confidence going forward.
• If Canopy Growth suffers a bearish reaction to the event and falls on Friday, the downtrend is likely to accelerate. If that happens, the stock may fall back under the 48-cent level and begin to trade sideways again for a period of time.
• Canopy Growth has resistance above at 76 cents and at $1.02 and support below at 48 cents and at the 38-cent mark.

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