I trade from a technical perspective with a touch of the fundamentals behind my decision on whether I should be a buyer or seller. I do not short cannabis names as I am a long biased trader. That does not preclude me from shorting large cap names when the opportunity arises, but my focus is to be a buyer in the cannabis sector. I am going to present a signal I called in my trading room today for MedReleaf Corp. (OTC: MEDFF, TSE: LEAF.TO).
The key factor is how MEDFF has held up through heavy selling yesterday and is seeing a decent inflow of buyers yesterday. We had an “Inside Bar” yesterday on the daily chart. An “Inside Bar” is when a days total trading range is within the previous days trading range. Basically lower highs and higher lows. That shows a coiling effect and a battle between buyers and sellers. This common chart pattern has been a mighty chart pattern. When the stock extended past the high or the low of the inside bar by 1%, historically I have seen extended moves that happen fairly quickly. Some trading platforms even have indicators or preset parameters to spot the inside bars.
Based on the broad sell off and the secular weakness, MEDFF held up nicely and has coiled on the 30 and 60 minute chart. We see tight consolidation and a descending upper price channel (highlighted by the red arrows) which was breached this morning on steady buy volume (highlighted by the ellipse). With a slight trendline showing some strength. I am looking for a swing buy from 15.75 or lower. My stop will be just under the bottom of the price channel by .25 on the 60 minute chart. The squeeze could be in play and if buyers can support MEDFF from the $15.00 to $15.50 price range, I can see the shorts covering and the stock run to the $18.00 to $20.00 range. I will target $18.00 or higher to take partial profits and trail my stop accordingly. Next target will be just prior to the $20.00 mark as I think that will be a key psychological level to breach. I feel this is a very realistic target for the stock since there is a decent spread on bid / offer. If we continue to see trading volume pick up and the stock move higher, I have “high” hopes for the potential outcome.
The squeeze and possible breakout is what I am looking to play. The risk is fairly small and my upside potential is pretty large. Based on recent trading activity in MEDFF, this was a name I wanted to take a chance on. So if MEDFF remains above the $15.00 mark, this signal can still be considered. Trade at your own discretion.
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