Stocks

My Technical Take on Aurora Cannabis, Cronos, and Tilray

By Adam O'Dell  |  May 14, 2019

I’m really bullish on cannabis as a whole. I expect the industry’s rate of growth to exceed that of any other over the next five years.

That doesn’t mean I’m recommending you go out and scoop up every stock in the space. Many will prove to be duds. And even the eventual winners will be extremely volatile along their path to success.

But I think a “trader’s” approach will be key to playing this trend.

That incorporates a number of the principles and techniques I routinely write about here, in The Rich Investor, and also in my 7-Figure Trader service. Things like “trend,” or requiring that a potential investment be already trending higher before you allow yourself to buy it.

Also “momentum,” or ensuring that a potential investment is rising faster than the broad market, since we know of the tendency for winners to keep winning.

And of course, “money management,” or putting the asymmetry of risk and return in your favor, and also prudent position-sizing and diversification.

These technical factors can be determined by price action alone — a key advantage, I think, in an early-stage industry that’s being driven by investor sentiment and fund flows as much as anything else, including fundamentals.

Aurora Cannabis Inc (NYSE: ACB) is due to release the results of its first quarter after the closing bell today.

I have no special or advanced knowledge of what the company will say about its revenue, earnings, or balance sheet. Nor do I know how the market will react to hearing the company exceeds (or falls short of) analysts’ expectations.

Keep in mind that Wall Street has just barely begun covering the cannabis industry — a clear sign that we’re still in the very early innings of the industry’s buildout.

But what I do know is…

Aurora Cannabis Is on My “Avoid” List, For Now

Remember, I’m a quantitative analyst — or “quant,” for short.

I conduct statistical research on historical price action. And I design systems that tell me when to be in a stock and when to be out — all without requiring specific knowledge about a company’s fundamentals, or what its CEO says on an earnings call.

One of the systems I’ve used for many years now is designed to keep me invested in “major” bullish trends while occasionally recommending a move to cash, when one of three sell signals is triggered.

The sell signals are fairly simple and, importantly, based solely on the price action of the stock — nothing subjective.

This, as I see it, is the “trader’s way.” And as I said, I think it’ll prove to be the best way to play the cannabis industry.

But back to Aurora…

I think Aurora Cannabis could be a great pot stock play someday. Just not today.

Currently, my three-sell-signals strategy has shares of Aurora Cannabis in “Avoid” status.

Shares of another major cannabis player, Cronos Group (Nasdaq: CRON), is also currently on that “Avoid” list.

So, too, is Tilray (Nasdaq: TLRY), last year’s most infamous pop-and-drop cannabis stock.

Of course, my three-sell-signals system has already identified profitable trades on a number of cannabis stocks, including the big boys like Aurora and Cronos.

Overall, the strategy has more than doubled an initial $10,000 investment in Cronos… and quadrupled it in Aurora’s stock.

Though currently, the system is saying it’s best to avoid these cannabis stocks for the time being — a buy signal could resume later this year.

What Does It Mean?

Unlike buy-and-hold, my three-sell-signals strategy is designed to help you avoid the worst of extended bear markets and price plunges. At the same time, if all’s well with the stock’s price action… it will keep you in the bullish trend for potentially extraordinary profits.

I’ve written before about how well this worked with Amazon (Nasdaq: AMZN)…

The system could have worked to turn $100,000 into $8,388,000 while spending 48% of market days in cash… and, thus, largely avoiding the worst of both the 2000-2002 and 2007-2009 market crashes.

My 7-Figure Trader readers know capital preservation is a key element of my approach. So any system I design that has a “buy” signal must also have a well-defined set of sell signals.

That measure of security is what allows you to ride a massive bullish trend with confidence — whether it be Amazon’s, or the next big cannabis stock.

The cannabis industry is young and untested. And while I’m confident there will be many opportunities to make massive gains, I really think you’ll want to take an active trader’s approach. By setting objective rules and following a system, you’ll be better prepared to stick to your guns and avoid being misled by the hype.

This has been my modus operandi — my “M.O.” — all along. The “trader’s way” underpins my Cycle 9 Alert and 10X Profits services, and it’s how I’m approaching the budding cannabis industry, now that I believe it’s officially “game on” for the space.

FREE BOOK: 95% of Stocks Are Tanking Your Portfolio

In John Del Vecchio's stunning bestseller, he exposes how “bandit” companies are legally getting away fooling you with smoke and mirrors. He also shows you six simple tests every worthwhile stock must… Read More>>
Adam O'Dell

As Chief Investment Strategist for Dent Research, Adam O’Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with minimum risk. He achieves this with his perfect blend of technical and fundamental analysis.

Tactically, he does extensive back-testing and probability-based research. It’s the ultimate partner to the exhaustive research that Dent Research co-founders Harry Dent and Rodney Johnson do in the exciting realm of the new science of investing.

Adam is also the executive editor of our hugely successful trading services, Seven-Figure Trader, Cycle 9 Alert and 10X Profits.

He has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high-profit potential.

Aiming to find the best opportunities across all asset classes, Adam expanded into the commodities, equities and futures markets. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. MORE FROM AUTHOR