Like many cannabis stocks, HEXO (HEXO Stock Quote, Chart TSX, NYSE:HEXO) hit its high back in October when the lead-up to legalization caused a pot stock frenzy.
Since then, the sector has had both a downturn and then another upturn since the start of January. Now with a new listing on the New York Stock Exchange and its joint venture agreement with Molson Coors Canada, is Hexo ready to hit that $9.00 high again? Maybe, says technical analyst and portfolio manager Keith Richards, but don’t expect the stock to go much higher.
HEXO’s chart looks a little different from the other major players in Canadian cannabis, in that where December 2017 and January 2018 saw a significant spike across the sector, followed by a downturn over February and onward, HEXO definitely rose in December, 2017, but then refused to fall back: standing at $2.50 on December 1, 2017, the stock climbed to the high $3.00 range by late December and then hit the high $4.00 range by May, 2018.
Then, in mid-August all hell broke loose in the sector and HEXO rocketed to a high of $9.29 by October 16 — only to lose almost half of its value again over the following week.
But the stock is on the rise again, having climbed a whopping 68 per cent since the start of January to where it currently trades in the high $7.00 range. Is there more in tank? Richards says that getting back to $9.00 is a real possibility but that the stock will hit a lot of resistance once it gets there.
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“Whenever you get a stock that increases its liquidity for whatever reason —which might be a listing on another exchange— that’s a good thing,” says Richards of ValueTrend Wealth, to BNN Bloomberg on Friday. “Looking at the chart, this is definitely not a buy-and-hold stock, you really have to be trading it. You can see that it’s kind of on an upswing in a cycle again. It’s got a good possibility of reaching its [previous high].”
“Remember, all that technical resistance is is that somebody bought, in fact a whole bunch of people bought that stock at $9, and so as soon as you get back to $9, those people are going to say, ‘Man, do I ever want my money back,’” he says.
“And that’s literally how resistance works. Somebody bought it [at $9] and now they’re really sorry as they watched it fall to $4 and they’re just trying to break even. You’re going to hit that wall and you need a reason to get through the wall, so I would definitely be selling it at around $9, personally,” he says.