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Cannabis ETF MJ Basing & Volatility Patterns

Recently, the Cannabis sector has shown signs of increased volume, volatility, and a reasonably strong potential for a price base. Volume started increasing near mid-September as the price of MJ fell below $15. This support level originated from late December 2020 after a significant rally trend from recent lows near $10 – when the Reddit retail trader event started to unfold.

I wrote about this sector and these opportunities in many articles before the incredible rally in late 2020 into 2021.

What I find interesting are two things. First, the recently proposed cannabis reform legislation may prompt a nationwide declassification of marijuana as a class-3 drug. This change could open every state, consumer, industry, and banking/financial institution to kick the doors wide to participate in the cannabis industry. Secondly, this industry is well past the initial stages of growth and attrition from many years ago. Now, established players and proven markets are competing for market share. This creates a very competitive and dynamic environment in this sector.

What I believe can happen over the next 10+ years is a simple consolidation of the industry around centralized components of the cannabis market. And a renewed focus on federal approval and tracking related to “seed to consumer” regulations. My opinion is that the industry will see weaker players acquired by stronger players while startups still try to dominate the fringe market. These startups will likely be disruptors in the industry, just like independent brewers are popping up all over the US right now.

A Technical Look At cannabis etf MJ And The Pending January 2022 Apex

Technically, I see a very large Pennant/Flag formation on this Cannabis MJ chart. The formation leads me to believe early January could prompt a base or bottom near $13.25. I see the long-term support level, originating from the bottom in March 2020, as a very critical price level. This support level will likely prompt the current price to try and hold above $12.75~$13.00 as the final waves of the Pennant/Flag trend unfold.

If my wave count is correct, the price will attempt to bottom near $12.75~$13.00 soon. After this, the Cannabis MJ price will try to rally up to $15.25 to $15.75 before the end of 2021. A final downward price wave may push the price below the $13.00 level again as volatility becomes more elevated near the Apex of the Pennant/Flag formation. The Apex takes place near the end of January 2022. Therefore, traders should consider looking for buying opportunities near or below current support (somewhere near or below $12.75 to $13.00).

The Cannabis MJ chart shows price is attempting to confirm the lower support channel. If this lower support channel fails, we would wait for a new price trend to establish a new price pattern – hopefully providing better future guidance. Currently, this extended Pennant/Flag price formation appears to be trending and confirming nicely.

My belief is MJ will start at Apex near the end of January 2022. Meaning we should expect bigger price volatility and the potential for a “blow-off” price rotation sometime after January 15, 2022. Most Apex setups result in a type of wild rotation in price that I call a “blow-off” price rotation. Ideally, traders want to ride out the “blow-off” rotation and try to catch the breakout or break-away trend when it starts.

Daily MJ Chart Shows Clear Price Trending In Support Of The Lower Price Channel

This Daily MJ Chart highlights an upward price channel recently set up after price retested the $13.00 lower support level. If you understand the five waves of a Pennant/Flag formation, you’ll quickly understand there are two immediate potential outcomes for the price right now. First, the price could fail to stay within this channel and break downward – retesting the $13 lower support channel again (or possibly trend a bit lower). Second, the price could have already confirmed the $13 lower support channel and is in the process of moving higher – targeting the $15.25 to $15.75 level.

We are seeing some basing/bottoming in On Balanced Volume and a very large increase in the Daily trading volume recently. Both of these indicate traders are accumulating shares of MJ in preparation for a price move.

With pending cannabis reform legislation and President Biden likely to support this new economic frontier, any federal decriminalization of cannabis would potentially prompt a wave of buying within this sector. Given the current Pennant/Flag formation in MJ, traders may be already looking for opportunities in the cannabis sector. MJ could rally back above $20 to $21 fairly quickly.

Be patient, though, as this Pennant/Flag formation won’t be complete until sometime after January 10th to 14th. Plan how you expect the markets to trend throughout the end of this year. Watch how MJ reacts to the final three price waves of the Pennant/Flag formation. As we approach early 2022, the cannabis sector could become a leading one if the new cannabis reform legislation gets closer to becoming law. We may see another rally, like in early 2021. We may see MJ rally well above $25 if traders start chasing a breakout trend.

Want to learn more about the cannabis sector and others?

Follow my research and learn how I use specific tools to help me understand price cycles, setups, and price target levels. Over the next 12 to 24+ months, I expect large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase. Next, a revaluation phase may begin as global traders attempt to identify emerging trends. Precious Metals will likely start to act as a proper hedge as caution and concern drive traders/investors into Metals.

Kindly take a minute to visit www.TheTechnicalTraders.com to learn about my Total ETF Portfolio (TEP) technology and how it can help you identify and trade better sector setups. My team and I have built these strategies to help us identify the strongest and best trade setups in any market sector. Every day, we deliver these setups to our subscribers along with the TEP system trades. You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Chris Vermeulen

 www.TheTechnicalTraders.com

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ARKW ETF – Trade Tip Video Analysis

ARKW ETF trader tip – Technical Traders goes over ARKW ETF which is the next generation internet. Chris follows and trades the ARK Invest ETFs with his sector rotation strategy using pure technical analysis, and this is his ARKW Invest ETF Stock review for a new trade idea of which ARK ETF is best.

Subscribers to any service at The Technical Traders: Please let us know via a member ticket what you would like to learn about and we will do our best to make sure this happens.

Non-subscribers: Please enjoy these micro-lessons as a way to further your education and understanding of how a technical trader…well…trades!

BEST ARKW ETF TO BUY NOW – WATCH THE VIDEO

Which ARK exchange-traded fund is best to buy now?

I see ARKW as the best exchange-traded fund to buy for growth.

ARKW ETF Company

In this video, I’m going over the charts as a technical analyst to show you everything you need to know about the ark invest ARKW ETF.

What I like about the overall stock market condition with the small-cap stocks (Momentum and Growth Stocks) breaking to new highs is that is what many of the ARK ETF holdings are. It is always crucial to understand if investors are buying or selling any sector or ETF as you don’t want to invest in ARK funds if the price is still falling.

Follow us and get our ARK Invest ETF Trade alerts.

TO EXPLORE THE DIFFERENT TRADING STRATEGIES CHRIS OFFERS, PLEASE VISIT US AT THE TECHNICAL TRADERS. YOU’VE GOT MORE TO GAIN THAN TO LOSE WHEN SEEKING INFORMATION!

Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.

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Bonds-the fourth quarter trade of 2014

If you have been paying close attention to the stock market, market internals/breadth, and bonds for the past three months, you’ve likely come to the same conclusion that I have.

The US stock market is showing signs of severe weakness with the market breadth and leading indicators pointing to a sharp correction for stock prices.

With fewer stocks trading above their 50 and 200 day moving averages each week, while the broad market S&P 500 index continues to rising, this bearish divergence is a red flag for long term investors.

When a handful of large-cap stocks are the only things propelling the stock market higher while the majority of small-cap stocks are falling you should keep new position sizes smaller than normal and start moving your protective stops up to lock in gains/reduce losses in case the market rolls over sooner than later.

Small cap stocks are typically a leading indicator of the broad market. The Russell 2000 index is what investors should keep a close eye on because it’s the index of small-cap stocks. Since March of this year, the Russell 2000 been trading sideways and actually making new lows. This tells us that big-money speculative traders are rotating out of the stock market and into other investments like high dividend paying stocks, blue chips, and likely bonds.

Looking at the chart below I have overlaid the S&P 500 index and the price of bonds. History has a way of repeating itself; although it may never feel the same and the economy may be different, price action of investments have the tendency to repeat.

In 2011 we saw the stock market and bonds form specific patterns. These patterns clearly show that money was rotating out of the stock market and into bonds. During times of uncertainty in the stocks market money has the tendency to move into bonds, as they are known as a safe haven. Bonds tend to reverse before the stock market does, so if you have never tracked the price chart of bonds before, then you should start.

SPXvsBONDS

From late 2013 until now bonds and the stock market have repeated the same price patterns from 2011. If history is going to repeat itself, which the technical and statistical analysis is also favoring, we should see the stock market correct 18% to 30% in the near future. If this happens bonds will rally to new highs.

It’s important to realize the chart above is weekly. Each candle represents five trading days, and four candles represents one month. So while this chart points to an imminent selloff from a visual standpoint, keep in mind this could take 2 to 3 months to unfold or longer. The market always has a way of dragging things out. If the market can’t shake you out, it will wait you out.

So if you are short the market or planning to short the market be very cautious as it could be choppy for the next several weeks and possibly months before price truly breaks down and we see price freefall.

To get my pre-market video analysis each day, and trade alerts visit: www.TheGoldAndOilGuy.com

Chris Vermeulen

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How Much Will a 15% Hair Cut Cost Your ETF Portfolio?

Over the past few weeks I have been watching the DOW and Transportation index closely because it looks and feels like the Dow Theory may play out this year and the stock market could take a 15% haircut.

But what if you skipped on the haircut and opted for a 40% refund?  What? Keep reading to find out how.

Keeping this post short and sweet, I think the US stock market is setting up for a sharp selloff. And it will look a lot like the July 2011 correction. If my calculations are correct this will happen in the next 3-9 weeks and we will see a 15% drop from our current levels. Only time will tell, but I have a way to hedge against this with very little downside risk to you ETF portfolio.

 

The Dow Theory Live Example for ETF Portfolio

The daily chart of the SP500 index below shows our current trend analysis with green bars signaling an uptrend, orange being neutral, and red signaling bearish price action. Currently the bars are green and we can expect prices to have an upward bias.

The Dow Theory could be  in play. When both the Transports (IYT) and the Dow Jones Industrial Average (DIA) cannot make higher highs and start making lower lows, according to the Dow Theory the broad stock market is topping.

We are watching the market closely because they have both made lower highs and lows.  This rally could stall in the next couple weeks and if so we expect a 15% correction.

 

Model ETF Portfolio

 

Take a look at the 2011 Stock Market Crash

Model ETF Portfolio Trading

The chart above shows how fearful traders have a delayed reaction to moving money from stocks to a mix of risk-off assets.

The choppy market condition during August and September clearly helped in frustrating investors and created more uncertainty. This helped prices of this ETF portfolio fund rally long after the initial selloff took place. This is something I feel will take place again in the near future and subscribers of my ETF newsletter will benefit from this move.

Because we have a Dow Theory setup, our risk levels are clearly defined as to when to exit the trade if it does not play out in our favor. But with the potential to make 40% and the downside risk only being 4%, it’s the perfect setup for a large portion of our ETF portfolio. And just so you know this is not a precious metals trade as we are already long that sector and up 10% in that position already.

Get My Daily Video Forecasts & ETF Trades Today – Get Off The Fence Make Your ETF Portfolio Perform

Chris Vermeulen
www.TheGoldAndOilGuy.com