APH Stock: Setting Up to Move
BUZ INVESTORS Leading the Marijuana Stock Pack Marijuana stocks are still popular among investors and it is easy to see the logic behind their enthusiasm. Marijuana is on its way to becoming a staple in the North American economy. Marijuana legalization is now in the process of becoming a realty, and although the framework has not yet been provided, the legalization date of July 2018 has been provided. (Source: “Liberals to announce marijuana will be legal by July 1, 2018,” CBC News, March 27, 2017.)
Many companies are set to prosper under this new segment of the economy, and I believe that a licensed producer of marijuana, Aphria Inc (TSE:APH), is set flourish under such conditions. I believe that the previous performance of APH stock is only a precursor to what is to come, and further gains are likely for Aphria stock.
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Leading the Marijuana Stock Pack
I have been, and still am, under the impression that speculation continues to drive hot money into this sector. This speculation is driven around the notion that recreational marijuana will grow into a multi-billion dollar industry. I am not disputing this notion, but company valuations in this segment may have gotten ahead of themselves. This potentially creates a “buy on rumor, sell on news” event that will play out when the framework behind legalization is finally announced. At that point, I can expect the hot money that has been fueling these to names to head for the exits, and a sell-off to ensue.
The moving average converge/divergence (MACD) indicator in the lower panel has been instrumental in identifying when an advance was set to occur. MACD is a simple, yet effective trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
In November 2016, January 2017, and February 2017, whenever a bullish cross was generated, a bullish advance quickly ensued. This signal suggests that bullish momentum is now propelling APH stock, and as a result, the path of least resistance is geared towards higher prices.
Aphria stock’s performance continues to impress, and the price action below resistance has consisted of higher highs and higher lows. It is difficult to assume anything other than a bullish view on this investment at this juncture.
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