SPLIF Stock: One Last Hurdle Remains
In 2018, Canada paved the way by legalizing marijuana. In 2019, Canada is taking the next steps by legalizing marijuana edibles.
From an investment standpoint, the October 17, 2018 legalization date set by the government became a selling event. The marijuana producers ran up in anticipation of legalization, and then they sold off once marijuana became legal. This was a classic “buy on rumor, sell on news” event.
If we assume that the market for marijuana edibles is setting itself up for a similar outcome this year, then a potential opportunity has presented itself. This is especially true at the moment because the entire sector has been battered by selling pressure in recent months.
So, in anticipation of a potential bull market in marijuana edibles, I have been sifting through the rubble, looking for compelling names. A company that I find compelling in this sector is Nutritional High International Inc (OTCMKTS:SPLIF, CNSX:EAT).
For one, SPLIF stock is attractive based on valuation.
Nutritional High International just reported revenue of $5.8 million in the last quarter, which was an increase of 39% over the previous quarter, and an increase of 244% over the same quarter last year. This news did give the stock a boost, but it still only sports a micro-market cap of $64.0 million. (Source: “Record Cannabis Sales of $5.8M in Q1 2019; 39% growth over Q4 2018 and 244% over Q3 2018,” Nutritional High International Inc, December 28, 2018.)
The second reason is technical in nature.
SPLIF stock has begun generating bullish signals suggesting that the worst may be finally behind this stock and that an accelerated move toward higher prices may be on the horizon.
The bullish signal I am referring to was generated by an influential momentum indicator. It is highlighted on the following stock chart.
Chart courtesy of StockCharts.com
The moving average convergence/divergence (MACD) indicator located in the lower panel is the momentum indicator I am referring to.
MACD determines if the momentum influencing the price in a stock is either bullish or bearish. The reason why this is important information is because a stock will likely stage an advance while bullish momentum is influencing its price action. The same stock will likely stage a decline when bearish momentum is influencing its price action. The examples on the chart above clearly illustrate this concept in action.
For instance, in July 2017, a bullish MACD signal was generated, indicating that bullish momentum was influencing the price action in SPLIF stock. In the months that followed this bullish signal, Nutritional High International stock staged an advance, taking on 942% in gains at its highest point.
In February 2017, a bearish MACD signal was generated, indicating that bearish momentum was influencing the price action in SPLIF stock. In the months that followed this bearish signal, Nutritional High International stock staged a decline, taking on 72.7% in losses at its lowest point.
Now that a bullish MACD signal was generated at the end of December 2018, it is once again suggesting that SPLIF stock is being influenced by bullish momentum. Therefore, the stock price will likely stage an advance. This is the bullish signal I was referring to that is suggesting that Nutritional High International is poised for higher stock prices.
If SPLIF stock is indeed destined to repeat the run that occurred in 2017, it will need to break above a significant price metric, which is highlighted on the following Nutritional High International stock chart.
Chart courtesy of StockCharts.com
The 200-day moving average, highlighted on the chart above, is the price metric I am referring to.
The 200-day moving average acts as a dividing line that determines if a stock is in a bullish or bearish state. Much like the signals generated by the MACD indicator, when a stock is above the 200-day moving average, it is in a bullish state and therefore likely to appreciate. On the other hand, when a stock is below the 200-day moving average, it is in a bearish state and likely to depreciate.
Currently, Nutritional High International stock is below the 200-day moving average and needs to break above it to confirm the implication suggested by the bullish MACD signal.
This was the same setup that occurred in 2017. The MACD indicator generated a bullish signal in July, and it was not until after SPLIF stock broke above the 200-day moving average in November that the run toward higher prices was initiated.
This is why I believe that when Nutritional High International stock finally sustains a close above the 200-day moving average, an accelerated move toward higher stock prices will likely follow.
I am watching Nutritional High International stock because it has already begun generating signals to suggest that a move toward higher prices is on the horizon. I believe that as soon as SPLIF stock can sustain a close above the 200-day moving average, this will initiate a move toward much higher stock prices.
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