Don't Ignore This Bullish Signal in TRLV

 

Well, another month has come to a close, and unfortunately it was another disappointing one for cannabis investors. If you've been following my blog for a while, you know I'm a big believer in seasonality. Historically, July has been one of the most bullish months of the year for marijuana stocks, so I came into the month expecting the sector to finally show some life. Instead, we got the exact opposite.

Rather than rallying, cannabis stocks spent most of July drifting lower and breaking important support levels along the way. Needless to say, that wasn't what I expected. Does that change my long-term outlook? Not at all.

The truth is, nobody knows when this sector is finally going to wake up. It could be next week, next month, or several months from now. That's simply the reality of investing in a beaten down sector. But one thing I have learned over the years is that the biggest moves usually begin when the majority of investors have already given up hope. That's why I believe it's so important to have a game plan before the rally begins instead of trying to figure things out after prices have already exploded higher.

One cannabis stock that continues to stand out to me is TRLV. If you look at the daily chart above, you'll notice there really isn't much to get excited about. During the month of July, the stock basically moved sideways with a slight downward bias. If you were only looking at the price chart, you'd probably move on to something else.

But that's exactly why I spend so much time studying relative strength.

Now take a look at the ratio chart comparing TRLV to MSOS. Suddenly, the picture changes. While the stock itself has gone nowhere, the ratio line has been climbing steadily higher. In fact, it's now sitting at a new five-week high. To me, that's a very encouraging sign because it tells me TRLV is quietly outperforming the cannabis ETF even though the sector as a whole continues to struggle.

I've said it many times before: the strongest stocks usually reveal themselves before they actually begin making major price advances. Relative strength often gives us an early clue about where institutional money may be flowing, and right now TRLV is showing exactly the kind of behavior I like to see.

My expectation is that when MSOS finally turns higher and I do believe that day is coming, TRLV has an excellent chance of leading the cannabis sector. That's one of the reasons it remains one of my favorite cannabis holdings, and I continue to believe much higher prices are ahead.

I also want to point out something that's important. Notice the timing of this post. I'm not writing about TRLV after it has already made a huge move or after everyone on social media is talking about it. I'm sharing what I'm seeing before the breakout happens. Will I be right? Of course, there's no guarantee. The market has a way of humbling all of us. But if you're looking for a cannabis stock that is quietly showing leadership while everyone else is focused on the weakness in the sector, I believe TRLV deserves a spot at the top of your watch list.

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