Quiet Day, Quiet Strength in Cannabis Stocks

Another quiet day for the cannabis stocks, but I’ll take quiet with a slightly green close over the alternative. We managed to finish marginally higher, and at this point in the month, that alone feels notable. With six trading days left on the calendar until the end of January, you would think we’d have heard something by now from Pam Bondi regarding the final steps on cannabis rescheduling. Assuming she follows through and wraps things up as requested by Trump, the announcement could really come at any time. Until then, the market continues to wait and waiting markets tend to drift.

Even on slow days like this, I’m always looking for clues under the surface. Today, two names stood out to me: TLRY and CURLF. Neither made any big headlines, but technically they’re sitting right at key support levels, and that’s where my attention usually sharpens. What caught my eye was the action right at the open. In both cases, it looked like buyers stepped in almost immediately, defending those levels before things had a chance to slip lower.

When I flipped down to the ratio lines in the lower pane, the picture got a little more interesting. Both TLRY and CURLF showed a slight upturn versus MSOS, which tells me they were beginning to outperform the broader cannabis ETF, even if only modestly. That kind of relative strength doesn’t mean much on its own, but it’s often how early moves begin quietly and without much attention.

Volume, however, was nothing special. It came in about average, so we don’t yet have that extra confirmation I like to see when a real move is getting started. Still, the fact that support held and buyers were willing to show up at those levels is something I don’t want to ignore. In beaten down groups like cannabis, rallies often start from these exact conditions: boredom, skepticism, and subtle relative strength.

For tomorrow, I’ll be watching closely for follow through. If these stocks can build on today’s action and volume begins to expand, that would be a meaningful change in character. Until then, patience remains the name of the game but the setup is starting to get interesting. 

For more analysis and market insights, visit my homepage 

RDW Defends the 13 EMA as the Trend Is Tested

 Above is a daily chart of RDW with a 13-day exponential moving average of the lows, and over the past four months this average has done an excellent job of acting as both support and resistance. It’s one of those levels that just keeps showing up on the chart, and when that happens, I pay attention. You can clearly see how many times this moving average has essentially nailed both the highs and the lows during that period, and today was no exception.

Early in the session, RDW pulled back and tagged this 13 EMA of the lows almost perfectly. That level once again acted as support, and price responded the way you’d want to see if you’re leaning bullish. Buyers stepped in, defended the level, and RDW managed to close back above $10 by the end of the day. From a technical perspective, that’s a constructive outcome and reinforces the importance of this moving average.

For me, this 13 EMA of the lows is now my clear line in the sand for the short-term uptrend that began in early December. As long as price continues to hold above this average, I’m willing to give the benefit of the doubt to the bulls. It defines risk very clearly and keeps me from overthinking every little pullback. A decisive close below this level, however, would change the character of the chart and would make me much more cautious in the near term.

That said, it wasn’t a perfect day. I did notice some subtle signs of relative weakness versus the broader market. Around 3:00 ET, when the SPY pushed to a new high, RDW failed to confirm with a new high of its own. That kind of non-confirmation is worth noting, especially in a stock that’s been driven heavily by momentum and sentiment.

Still, as long as RDW continues to respect this 13 EMA of the lows, I’m going to stay bullish and stick with the trend. The chart is telling me where I’m right and where I’m wrong, and for now, that key average remains firmly intact.

I recently highlighted this same 13 EMA in my post “RDW Approaches Resistance as I Wait for a Better Entry,” and it continues to prove its usefulness.

MRNA’s Relative Strength Told the Story Early

 Today was another strong day for MRNA, and as a day trader this was a great example of how relative strength can tip you off early if you’re paying attention. Above is a 5-minute chart of MRNA that includes the pre-market and after-hours session, and in the lower pane I have the SPY for comparison. This relative comparison is where the edge showed up today.

At point A, right at the opening bell, the SPY pushed higher and then quickly rolled over. The market rally failed and price sold off, eventually making a lower low at point B. If you were only watching the indices, that action could have easily kept you cautious or even bearish. But MRNA was telling a very different story.

MRNA also opened at point A and initially rallied, but instead of following the SPY lower, it held its ground. Rather than selling off, the stock went sideways and carved out a higher low at point B. That’s the key. While the market was weak and making lower lows, MRNA refused to break down. This is classic relative strength and, for me, it’s often a sign that a stock is under accumulation. Institutions don’t wait for perfect market conditions; they buy what they want when they want it.

This divergence was the clue that MRNA was acting better than the market, and it immediately put the stock on my radar. When price eventually took out the high of the day, that relative strength resolved itself to the upside. Buyers stepped in aggressively and MRNA rallied strongly into the close, rewarding anyone who was patient enough to wait for confirmation.

What made the move even more impressive was the follow-through after the bell. Instead of stalling or fading, MRNA continued to push higher in the after-hours session, eventually hitting a high of 53.28. That kind of strength late in the day and after hours reinforces the idea that demand is still there.

This was just a great, clean example of how relative strength works in real time. The market doesn’t always give you easy trades, but when a stock can hold firm while the SPY is weak, it’s worth paying attention. Days like today are a reminder that the clues are often there well before the big move starts.

For more analysis and market insights, visit my homepage 

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.

Nasdaq Weakness Confirms: Pullback Begins

 

Over the past week I’ve been warning about the relative weakness I was starting to see in the Nasdaq, and today we finally saw that weakness begin to play out. Above is a daily chart of QQQ, with SPY in the lower pane for comparison, and the divergence really couldn’t be clearer to me. Last week SPY pushed to a fresh high, showing continued strength in the broader market. QQQ, on the other hand, failed to confirm that move. It did not make a new high, and that non-confirmation was the first real warning sign that something was off beneath the surface.

Whenever I see one major index making new highs while another lags behind, I start paying very close attention. Markets don’t usually top all at once, and leadership often starts to narrow before we see a pullback. That’s exactly what I felt was happening here. I mentioned last week that as long as minor support held, the market could continue chopping higher. But I also said that once that support was taken out, it would act as a trigger for a potential downside move.

That trigger came today. QQQ broke below last week’s low at 614.56, and to me that’s a meaningful technical development. This break confirms the relative weakness that was already showing up on the chart. In my opinion, this move marks the beginning of a pullback in the market. I’m not looking for a crash, and I’m not pounding the table on a major bear market. What I do see is an overdue reset after an extended run higher.

What’s important now is where the relative strength is showing up. While QQQ is breaking support, IWM has continued to act much better. Small caps have been holding up and, in some cases, pushing higher while the Nasdaq rolls over. That’s the index I want to focus on going forward. If the market is going to pull back, I want to be aligned with the areas that are still showing strength.

For anyone who wants more background, you can read my original post from last week titled: Relative Weakness in QQQ Signals Caution, Not Panic where I first outlined these concerns.