Two Interesting Charts For Tomorrow: Hydropothecary, Canopy Growth Corp

Hydropothecary Corp (CVE:THCX) (OTCMKTS:HYYDF) and Canopy Growth Corp (TSE:WEED) (OTCMKTS:TWMJF) (FRA:11L1) are Midas Letter stocks of interest for May 25th. Both stocks are nearing inflection points which could portend the near-term direction and trend.

Hydropothecary Corp

The Hydropothecary Corp is interesting on a number of levels. Starting with the price action, the stock experienced its second green close above the 5-month consolidation range which began in December. In the face of moderate weakness in the Midas Letter Canadian Cannabis Index today, THCX stood tall. It was the only major issue to gain ($0.08, or ↑1.52%), bucking sector fragility everywhere else. Regardless of market conditions, Hydropothecary has continued to grind upwards and show relative strength in most May sessions.

While investors will gladly take this slow-motion melt upwards, it’s the company’s backstory which also has us intrigued.

Takeover speculation has picked up steam ever since Aurora agreed to purchase MedReleaf in an all-stock deal worth $3.2 billion fully diluted. Hydropothercary—along with CannTrust Holdings—were generally considered the two most attractive all-round Licensed Producers in Canada. We recently penned a piece how Hydropothecary and Molson Coors Brewing Co. would make ideal dance partners.

Furthermore, according to recent data, Hydropothecary Corp. has the largest short interest increase in notional dollars on the TSX-V than anyone else. With $14,732,150 short bets put to work, at an average closing price of $4.71/share during the period between April 30-May 15 (see chart), I calculate that roughly 3.1 million shares have been shorted in recent times—and it’s all underwater currently. As THCX is not part of any significant index, it’s likely a straight bet (not hedged).

The position is not large compared to the overall percentage of the float, but it’s large enough for a panicked short to provide short term fireworks.

Finally, Hydropothecary announced it had applied to the Toronto Stock Exchange to graduate from the TSX Venture Exchange and have its common shares listed on the TSX. If successful, it would open the door to additional investment and fund dollars.

The key questions going into the Friday session: Has THCX run out of steam? Can sellers corral bulls and prevent prices from getting out of hand despite the positive technical/fundamental picture? The answer to this question will determine if THCX sees $5.60 and above or rangebound (sub-$5/share) in the next session or two.

Canopy Growth

For much of the day, Canopy Growth followed the same price action playbook as Cronos Group upon its listed on NASDAQ three months prior. Unfortunately, the wheels fell off as the afternoon progressed, and CGC did not experience the same intraday recovery CRON had on February 27. Selling was constant there’s was no letup as the closing bell rang (LOD, ↓6.22%). This should make bulls think twice heading into Friday.

Thus, the big question into tomorrow is whether the profit takers will slink to the sidelines and relent (Cronos Group Day #2 scenario), or whether we’re looking at a multi-day selling phenomenon.

In my view, the key short term delineation point lies at $36.00/share. A move there would close the May 22 gap-and-run brought forth by the Jim Cramer interview, hard NYSE listing date announcement.

If prices are trading significantly below that level by mid-morning, the $34.50-34.75 area becomes much more of a possibility short-term. If $36.00 is tested within the first 45 minutes, holds, and starts drifting above, Canopy Growth should be able to claw back some of the gains it lost today.

Either way, Canopy’s bullish technical picture remains valid above $34.50/share.

Original article: Two Interesting Charts For Tomorrow: Hydropothecary, Canopy Growth Corp

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