Cronos Group Inc (NASDAQ: CRON) investors have been on a roller-coaster ride so far in 2019, like other cannabis stocks, Cronos got off to a hot start to the year. The Cronos rally ran out of steam in early March, and traders have been searching for a bottom for the stock ever since.
Despite a difficult month of May for most stocks, Cronos may have actually found near-term support amid the sell-off. Here’s a look at the chart.
Rally Runs Out Of Steam
Cronos started off 2019 by rallying from around $10 in January to as high as $25 by early February. A push above $25 was short-lived, and the stock failed to re-take the $25 a second time in early March. The double top at $25 was an extremely bearish technical formation, and the stock has drifted lower ever since.
In early May, Cronos bounced at $14. While it hasn’t made much progress since, $14 was certainly not an arbitrary level to find technical support. In fact, $14 was the previous resistance level for the stock throughout most of the second half of 2018. Cronos tested the $14 level twice in September and December and failed to break out to new highs before finally doing so in January.
Experienced technical traders know resistance levels often transition to support once a breakout has occurred. The stronger the resistance level was prior to the breakout, the stronger potential support it will be following the breakout.
Cronos shares approached the $14 level in May for the first time since the stock’s January breakout, and the definitive bounce is a good sign that $14 has, in fact, transitioned to support. To further solidify that support, the stock’s 200-day simple moving average is currently at $13.80 and rising. The stock hasn’t closed below its 200-day SMA since October.
Levels To Watch
If $14 support continues to hold, traders should watch the $16 level for the first signs of near-term resistance. Cronos made it as high as $16.55 last week on an intraday basis before running into heavy selling pressure and closing at around $16. Above the $16 level, a close above the 50-day SMA and $17.20 and late-April’s highs of around $17.20 could be a sign that the stock has bottomed and is heading back up to a retest of $25.
At the same time, a breakdown below $14 could be extremely bearish. Below $14, Cronos has little clear technical support until it gets to the $7 to $8 range where it found buyers in late 2018.
Cronos Group's stock traded at $15.60 at time of publication Tuesday morning.
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