Canadian CANNAINVESTOR Magazine April 2017 - Page 87

Naturally Splendid’s stock saw it stabilize on news of a transition in management and the stock never dipped below 30 cents. An investor who believes in the turnaround story could’ve easily entered the stock and mitigated their risk to a close below 30 cents.

Using a combination of volume, price, moving averages and a few other indicators, the astute investor is able to make smart decisions about companies that he or she is fundamentally bullish on. In case anyone is wondering, the bars to the left of those charts are “volume by price” bars which measure volume at a particular price level. An entry into any of the three stocks listed at or around the blue line with a stop loss limit order placed under the area of support not only minimizes risk but also increases our upside in entering the position.

Bollinger Bands

The Bollinger bands have become one of my favourite tools to use when it comes to trading stocks in the cannabis industry; particularly when they tighten up on the companies I am most bullish on. The tool is quite simple but at the same can be a good gauge of when to enter or possibly trim up and take some profits off of a position. One can adjust the indicator however they choose but I prefer to use the standard 20 day moving average as the go-to for which the Bollinger bands will be plotted. Once the 20 day moving average (or whichever you choose) is in place, the bands are plotted to the upside and downside from the moving average. This is much easier visually. Here is a real life example of PharmaCan Capital Corp (TSXV:MJN; OTC:PRMCF) which experienced a Bollinger band breakout recently: