Canopy Growth Corp (TSX:WEED) (NYSE:CGC) Charts Scream Buy Now

Canopy Growth Corp (TSX:WEED) (NYSE:CGC) is currently trading at one of its lowest price levels in two years. The decline in Canopy stock to the current lows can be attributed to two major issues: Canadian politics and the company’s financial performance in the latest quarter.

Investors generally shunned Canadian cannabis stocks in the run-up to the country’s national election in which incumbent Justin Trudeau faced a tough re-election challenge from a conservative candidate. Investors worried that a win for the conservatives could result in the rollback or a slow rollout of cannabis-friendly regulations. Since coming into power in 2015, the Trudeau administration has been supportive of Canada’s cannabis industry. That resulted in Canada becoming the first developed country to legalize cannabis for recreational use a year ago. Trudeau won the tough re-election contest last month, bringing reprieve to cannabis investors. However, Canadian cannabis stocks like Canopy are still trying to recover from the selloff sparked by fears over Canada’s national election.

As for Canopy, in particular, lackluster fiscal 2020 second-quarter results released last week added to the downward pressure on the stock. That saw the stock take a big plunge to its 2-year low last Friday (November 15).

About Canopy Growth Corp

Canopy is one of the top cannabis companies in Canada. It also has a presence in the hemp market. Moreover, Canopy boasts a significant international footprint in the regulated cannabis industry. Canopy operates multiple cannabis brands and its products cater to both medical and recreational cannabis markets.

Why Canopy Growth Corp is a buy at current level

History repeats itself. In the case of Canopy, history is on the side of the bulls at this point. Canopy is currently trading at $15 price range – one of its lowest price levels in two years. But this isn’t the first time Canopy has dropped this low. Around this time two years ago (November 13, 2017), Canopy was trading at $15. Bears felt like Xmas had come early, but they were wrong. In less than a month, Canopy had sharply reversed course and by the end of December 2017, the stock had almost doubled its price to $30. It was trading even higher in mid-January 2018. As would be expected, investors began booking profits after the stock surged, resulting in a pullback.

That scenario repeated itself almost perfectly a year later. In November 2018, Canopy was on a downtrend and by December the stock was at one of its lowest price levels. However, the stock sharply reversed course in mid-December where it was trading at $25, so by mid-January the stock had almost doubled its price to $47.

With Canopy presently at one of its lowest price levels, you shouldn’t be surprised if it sharply reverses course and begins trending up from current levels. Of course, charts show Canopy has a history breaking out strongly from its November lows.

Cannabis 2.0 and more pot shops in Canada to expand Canopy’s market opportunity

Beyond historic price actions that show Canopy has a way of bouncing back from its lows, there are more reasons to be bullish on the stock. Last month, Canada expanded its cannabis market in what is called Cannabis 2.0 with the legalization of more cannabis-based products for recreational use. The sale of the newly legalized recreational cannabis products will kick off next month. Canopy is of the cannabis companies that have prepared to capture the expanded Canadian cannabis market with a range of products from cannabis-based drinks and edibles to vape pens.

Additionally, Canopy has ample cash reserve, more than C$2.7 billion, that it should readily deploy in areas such as product development and marketing as the need may call for to enable it to take full advantage of Cannabis 2.0.

Moreover, a shortage of cannabis shops has currently limited sales for cannabis companies like Canopy in Canada’s Ontario province. However, Canopy leadership views this as a short-term headwind that should clear soon or later and allow Canopy to realize its full potential in Ontario and Canada’s cannabis market in general.

“We believe our fundamentals are strong and are confident we’re moving in the right direction,” commented Canopy CEO Mark Zekulin.

Bottom line

Considering that Canopy is currently trading at one of its lowest price levels, and taking into account the stock’s history of bouncing back as well as its strong fundamentals, Canopy looks to be a great cannabis play currently available at a steep discount.

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Disclosure: We have no position in Canopy stock and have not been compensated for this article.