A Promising Cannabis Beverage Stock and a Technical Assessment of Tilray Inc.

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Source: Clive Maund for Streetwise Reports   10/01/2018

Sector expert Clive Maund takes a look at a pair of cannabis-sector stocks, suggesting what investors pull out of one might be well placed in the second.

Sproutly Canada Inc. ( (SPR):CSE) is a young cannabis company that is showing a lot of promise. What makes the company really stand out is that it has developed the first truly water-soluble cannabis solutions to be formulated into beverages/drinks ("Infuz2O"), using its patent-pending Infusion Aqueous Phytorecovery Process (APP). This gives it a big edge over the competition because water-soluble cannabis delivery does not require processing by the body, unlike oil emulsions. The effect is almost immediate. Its water-soluble cannabis infusions have applications in both medicinal and recreational markets, and its success in this field at a time when cannabis is moving toward the mainstream makes it especially attractive to the big beverage companies, for the reason that onset of effects via beverages needs to be rapid and offset too.

Sproutly came to market as recently as July, and although its chart looks positive, it hasn't risen in price much—yet. A 4-month chart is all that is required to review the action since it started trading. On the day it started trading it rose a lot more intraday than is shown. Otherwise it went into a trading range for a while, bounded by support at CA$0.46 and resistance at about CA$0.61.

Then suddenly, late in August, the stock made a huge gap higher, out of the trading range, on strong volume. This was very bullish action and it has so far held the support at the top of this gap. We can see that the newly birthed 50-day moving average is rising and now coming into play not far beneath to provide additional support.

The overall look of this chart is positive, with the price trending higher, strong upside volume and upside gaps, all of suggesting that it is likely to continue to advance. From the day it started trading to Friday's close it had risen by about 29%, which is nothing compared to what stocks in this sector are capable of. Compare this to Tilray Inc. ( (TLRY):NASDAQ), which rose about 1,500% in just six weeks. This is not to say it will ever compete with Tilray (nor will most other stocks in the sector), but to illustrate the point that its gain so far is very modest—it could go on to much greater things, and its uptrend could easily accelerate.

The reason for highlighting it today is that it is looking attractive now, after its reaction back over the past week or so toward the support at the top of the large gap. The light volume on Friday's drop suggests it could turn up again soon—or immediately.

Sproutly is therefore rated an immediate speculative buy, and especially on any further short-term retreat toward support at the top of the gap. Point for a stop is CA$0.626. Note that the chart for the U.S.-traded stock looks very different. It is still in a narrow trading range, but the volume pattern is very positive, with heavy volume on the runup over a week ago, that drove the On-balance Volume line sharply higher.

Sproutly website. Sproutly Canada Inc. closed at CA$0.67, $0.516 on Sept. 28, 2018.

Finally, note that it is considered prudent to take profits in Tilray ($143.62 in the early trade on Monday), or place a close stop. Tilray was recommended at $100 last weekend for a rebound after it collapsed dramatically, although it opened on Monday morning at $119. Even so, with it closing at $143.62 on Friday, we are up about 20% in a week. Looking at the latest Tilray chart, we see that the price has rebounded to the underside of the failed parabola, and also toward the resistance at the gap shown. With a lot of petrified speculators trapped in the top area, smarting from huge losses and wanting to get out, Tilray could easily head south again soon in a hurry. Even though the rally of the past week has resulted in gains of 43%, it still looks insipid compared to what came before. Furthermore, a bearish-looking "Hanging Man"candlestick appeared on the chart on Friday. If selling, the proceeds may be shunted into Sproutly.

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years' experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from the UK Society of Technical Analysts.

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Disclosure:
1) Clive Maund: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. CliveMaund.com disclosures below. I determined which companies would be included in this article based on my research and understanding of the sector.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Sproutly Canada Inc., a company mentioned in this article.

Charts provided by the author.

CliveMaund.com Disclosure:
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.

( Companies Mentioned:  (SPR):CSE,  (TLRY):NASDAQ, )

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