Above is a daily chart of MSOS, and as you can see, this market has been under pressure for the past couple of weeks. While the recent selling has certainly been frustrating for cannabis investors, I'd like to point out something on the chart that I believe deserves our attention.
Today, MSOS tested a very significant support zone between 4.30 and 4.45 and, more importantly, held it. This isn't just some random price area. If you look back at the chart, you'll notice this support zone first developed toward the end of last year. Since then, it has repeatedly acted as both resistance and support, making it one of the more important technical levels on the chart. Markets have a tendency to remember these types of price zones because they represent areas where buyers and sellers have repeatedly agreed on value.
What I find encouraging is that today's test of support was met with buyers stepping in aggressively enough to push the ETF well off its lows. Instead of closing weak, MSOS finished the session with a strong close above that support zone. When I see a market successfully defend a major level after an extended decline, it tells me that sellers may be losing some of their momentum.
Another positive development was today's noticeable expansion in trading volume. Increased volume doesn't guarantee a reversal, but it does tell me that there was greater participation during today's session. When higher volume accompanies a successful test of an important support level, I pay attention because it often signals institutional interest.
I've also drawn a trendline connecting the June 9th high with the subsequent lower highs. That downtrend has remained intact throughout this recent pullback, but we're getting close to challenging it. If MSOS can trade above today's high of 4.70, I believe that would also confirm a break of that descending trendline.
From my perspective, that's where things start to get interesting. A market that successfully holds a major support zone while simultaneously breaking a downtrend line often has the technical ingredients for at least a tradable bounce. No chart pattern is foolproof, and there are never any guarantees in the market, but when multiple technical factors begin lining up in the same direction, I believe the odds start shifting in favor of the bulls.
For now, I'm simply watching to see if buyers can build on today's strength. A move above 4.70 would be an encouraging next step and could attract additional momentum buyers. Whether this marks the beginning of a larger advance or just a short-term rally remains to be seen, but today's price action was certainly constructive. Let's see how things unfold tomorrow.
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