Which one of these sounds like a more attractive trade idea? An ETF that’s down 80% from its all-time high or one that is up 110% from its all-time low? That’s a tough one. Now consider this. Both of these outlandish percent moves describe the AdvisorShares Pure US Cannabis ETF (MSOS) , which is down 80% from its February ’21 high and now up 110% from its October ’23 low. While the percentage moves are other worldly, the most important aspect is this: MSOS’s recent comeback has kicked started positive momentum where the other false starts have failed over the last three years. And we should be paying close attention to it. Why? For one, no one else cares…yet. That’s what happens when traders who were over-the-moon excited in early 2021 have been burned over and over again with every failed rally attempt since. Don’t believe me? Take a look at the five-year Google Trends chart for the term “Cannabis Stocks.” The only discernable point here is the spike in early February’21, which lined up exactly with the ETF’s all-time high. We can’t go through every single small rally attempt along the way, but many of them were quite strong in percentage terms. More importantly, they provided hope for a turnaround. Hope has since disappeared. As the saying goes, the opposite of love isn’t hate; it’s indifference. Looking at this chart, we’re still in the indifference phase. How will this change? Apparently, a 110% three-month rally hasn’t done the trick yet. However, the monster move (which looks like a blip on the three-year chart), has very noticeably altered the ETF’s technical complexion, especially in the long-term work. And while we can’t expect 100% moves to continue, this strong advance from the lows may have begun a meaningful trend reversal. Reading the charts Here are some points to consider. 1. MSOS finally has broken above the steep downtrend line that started at the February ’21 high (as displayed here on the weekly chart using log scale). The ETF had flirted with piercing this line before – most recently this past fall – but each attempt failed before 2024. 2. The 200-day moving average has finally turned higher. The slope still is relatively flat, but it’s a lot further along than at any other time since it first rolled over in late 2021. 3. MSOS has been trading above the upward sloping 200-Day MA for most of the time since last summer. Since the downturn started in 2021, this did not happen at all. The summer’23 spike briefly put the ETF above the line, but that was short-lived. Any index, ETF or stock that’s in a long-term uptrend is trading above an upward sloping 200-day moving average. Thus, for this comeback to be meaningful, both of these conditions need to persist. 4. A bullish pattern breakout is in motion. Again, the percent move already is huge, but the simple fact that we can identify a legitimate breakout is a step in the right direction. Whether this upside target near $14.25 is acquired or not, seeing MSOS continue to make higher lows from here is critical. Higher lows are often the building blocks of bullish chart formations. Given how volatile the ETF is and how aggressively it responds to news (good and bad), all of this is subject to change again, but we should be aware of the potential shift, especially when no one is watching. (And remember this is a highly volatile ETF. Manage risk accordingly.) -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
