Locating a bottom is never easy, but right now a cheaper-priced Aurora Cannabis (NYSE:ACB) may finally mean better value for ACB stock bulls. Once more, though, a “show me the money” reversal-based strategy on the price chart looks like smart business. Let me explain.
It has been a hair under a month since last discussing ACB stock. At the time I was cautiously optimistic on the Aurora price chart. The better news is, I wisely offered readers an above-the-market purchase which never triggered in order to avoid catching a falling knife. At last week’s lows, ACB stock had seen an overall correction of 47% from last October’s all-time-high. So, what’s driving Aurora Cannabis investors these days?
Thursday’s headlines show a promising two-year contract win to supply a minimum of 400 kg of medical cannabis to the Italian government. That sounds pleasant enough for ACB stock. The bad news is investors are reacting more negatively to a Bank of America downgrade to “neutral” on cash burn concerns. Aurora has now dipped below $7.
Nevertheless and unlike Canopy Growth (NYSE:CGC) — which I remain bearish on — it’s once again time to put ACB stock on the radar for purchase, if a meaningful bottom on the price chart can be established.
ACB Stock Weekly Chart
Currently, what has caught my attention in ACB stock is a test of the 62% retracement level from last December’s low to 2019’s March high. In conjunction with potential Bollinger Band support and an oversold stochastics condition, I’m watching to see if shares can establish a candlestick reversal pattern.
Right now and if Aurora stock managed to right itself from Thursday’s early weakness, a move through last week’s high of $7.54 would be a very bullish signal to go long shares. Barring that and on the condition this week’s current low of $6.62 continues to hold, ACB stock bulls could tweak the purchase price to a reaction above this week’s high of $7.46.
My advice is for investors to simply respect the weapon of choice used to enter the position. In this instance, going long ACB stock is strictly based on the price chart and a pattern bottom being confirmed. As much and respectfully, if the low fails after Aurora shares are purchased, I’d recommend being quick to exit. At the end of the day BofA’s caution may be on the right side of ACB’s longer-term price action, as broken support could lead to a quick challenge of the December low near $5.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
More From InvestorPlace
- 2 Toxic Pot Stocks You Should Avoid
- 10 Tech Stocks That Are Still Worth Your Time (And Money)
- 7 Marijuana Stocks With Critical Levels to Watch
- 7 of the Best Smart-Beta ETFs to Target Right Now