VFF Shows Strength as Pullback May Be Ending

 Over the weekend I posted about why I believe this pullback in VFF was a buying opportunity, and today we finally saw some evidence that the pullback may be coming to an end. Above is a daily chart of VFF, and the first thing that jumps out at me is the bullish engulfing pattern that formed today. After a period of consolidation and selling pressure, seeing a strong engulfing candle like this is exactly the kind of price action I want to see if a stock is trying to put in a low.

Volume was slightly elevated, which is encouraging, but what really has my attention is the relative strength. Today was a weak day across the board. The overall market struggled, and cannabis stocks in particular were under pressure. Despite that, VFF managed to close up more than 4%, making it the strongest cannabis stock on the day. That type of outperformance on a down market day is a big tell for me. It suggests that buyers are stepping in with conviction while money is rotating out of weaker names.

I also talked about confirmation over the weekend. For me, confirmation of a potential low would come if VFF could take out last week’s high at 3.65. Today’s high was 3.65, so we’re right at that level. That tells me the stock is pressing up against resistance, and now it’s a matter of whether it can push through it. A clean move over 3.65 would go a long way toward confirming that the pullback is over and that the uptrend is ready to resume.

Another important piece of the puzzle is the ratio line in the lower pane. Notice how it has turned up and broken its downtrend. Relative strength turning higher often leads price, and seeing that shift now adds confidence to my thesis that this was simply a normal pause within a strong uptrend.

I’m already long this stock since last summer but I will be looking to add some more shares on a decisive move over 3.65. If you want more detail on why I was expecting a turn, you can read my weekend post titled VFF Pullback Looks Like a Normal Pause in a Strong Uptrend, where I laid out the full setup.