CRON trade ideas
CRON gap-up & profit taking ruin a great chart setupCRON was the one setup I was most looking forward to this morning with it's multiple daily inside bars and triple bottom in the $10.80s range. That setup was ruined with a higher open, and profit taking all day. While the daily candle is very bearish, CRON did hold key support and broke the hourly lower high pattern. To fully shift momentum back to their favour, the bulls must hold low of day 11.05 and break high of day 11.99 (call it 12.00 even). That would confirm an hourly uptrend, but I would still anticipate a daily lower high somewhere around $12.75 at best. The hourly MACD bull move is very week and keeping me skeptical of any ability for significant followthrough, and the daily MACD extended even further down today despite the higher trading range compared Friday.
Keep an eye on CGC here - the sector leader if very close to a significant daily bear break and the correlation to the sector leader will favour the CRON bears.
Key range to watch is 10.82 - 14.00.
CRONWaiting for $10 but looks like ready to start to turn around
Wait for trend to change on 5 min, then 15min, etc... Lower lows to higher lows
CRON tight range likely to break on MondayCRON formed its second daily inside bar on Friday as the range tightens up and the volume drops off. I'm looking for a break of range and a volume spike on Monday. I like inside bars because they signal equilibrium (pennant) patterns on a lower timeframe. Sure enough if you zoom into the hourly chart you can see a beautiful equilibrium playing out within our daily multiple inside bars.
Having pulled back 30% from all time high over the past seven trading days I'm anticipating a bull break as more likely that not, but correlation to sector leader Canopy Growth and the overall market will be worth keeping an eye on.
The range I'm watching is the low of Friday and the high of Friday, 10.86 - 11.40. Key daily support is 10.82, so any attempts to make an early entry by bottomfishing this range should have a stop loss just below that level.
On a bull break I would expect CRON to top out around $12.50-13.00 and then look for a tightening range on the daily chart. On a bear break we're looking down another 14% before our next support at 9.26.
For anybody playing CRON on the Canadian ticker, the setup is a little different. The range to break is 14.11 - 14.77. Key daily support is 14.05 so your stop should be just under that. On a bull break I would expect to top out around 16.00 and on a bear break we're looking down to test $12.05 support.
descending triangleso, i think this one is about to have a severe breakdown based on what i know.. give it a few hours.
CRON-The New BTC. A weeklong wave 4 correction appears finished.Poised to climb on Wave 5. Please DYODD. I am holding Jan 2019 $13 Calls which is currently 40% under water.
LONG on CRON - Parallel Channel and Falling WedgeI just took my gains on the short idea that I published on CRON -2.79% a couple days ago. Right now I believe the stock can bounce on the channel and price shows a falling wedge pattern. MACD is crossing as well and shows sign of a bullish opportunity.
I believe that the general sentiment on pot stocks is still fairly positive. However, there is a lot of speculation around it and I believe most pot stocks are way overvalued
Short on CRON - Divergence Technicals - CRON 9.78% broke out of a strong resistance today but failed to hold. Price is back within the parallel channel . In addition, RSI is diverging from price action. These are really simple, but strong bearish signals.
Fundamentals - Following the success of Tilray 38.12% , CRON 9.78% soared two days in a row, breaking new highs. However, no significant fundamental news within the company justifies such a jump in prices. I believe that the 560% change in price in 52 weeks is clearly an overreaction and could lead to a massive dump. Institutional investors are massively short on Cannabis stocks in general; CRON 9.78% is overpriced and will drop back down to the $9.13-10 level.
Idea on CRON for the next 4 weeksBased on IV and trend, I believe this will continue through October. This stock has strong support.
CRON - letting the dust settleCRON was all bulls today out of the gate setting a new all time high before pulling back hard. I'm watching the CRON range expecting a daily equilibrium from low of the oversold bounce to high of today. It's notable CRON is the only name that hasn't lost it's 4hr uptrend.
I'll be remaining very patient as the next couple of days set a tightening range with new levels to play off of. The break of that tightening pattern will set momentum for the days to follow. The 4hr chart currently looks bear-flaggy with extended hours on, although the big lower wicks are a point aginst that possibility. Breaking the low of today would confirm the bear flag.
Today's bear volume was very notable. We know there is ETF balancing ongoing this week that must settle up Friday, so I am leaning towards seeing more selling pressure into tomorrow and Friday.
I find the most clarity on the 4hr and daily charts.
Cron high on WeedOur stock pick for today will be Cronos. Looks like a decent buy considering the hype around pot stocks.
As the dates gets closer to the Canadian Marijuana legalization(expected Oct 17), positive sentiments may drive this stock up. With alot potential growth and a rumours on Coke + Marijuana(Wild Dreams) this stock is one to watch.
Another counter from the same sector that interest us is Aurora Cannabis. Looks bright long term but high risk due to high speculation.
On a TA point. rebounded above $8 and looks like a potential break out. We will not put all our eggs on this but to diverse a small portion for big growth.
CRON likes pivot pointsCRON went from the Monthly R1 pivot down to the Monthly pivot(P). So far this week, the high is at the Weekly R1 Pivot. It may come back down to the Weekly Pivot(P) by Friday, as along as <Wr1.
CRON bounce was by far the weakest of the major sector namesCRON low of Friday was just below the .5 retracement from low of consolidation to all time high 13.39. It had the weakest bounce Friday out of the big four, rejecting hard from the .382 dump retracement whereas other names hit the .5 or in the case of APH hit the .618. Watching the hourly chart for a break of it's tightening range to indicate short term momentum for this week, and helping to define levels for the daily tightening pattern on a macro level
OPENING: CRON OCT 19TH 10 MONIED COVERED CALL... for a 9.26/contract debit.
Max Profit: $74/contract
Max Loss: $926/contract
Break Even/Cost Basis: 9.26/share
Theta: 1.67
Delta: 23.56
Notes: Going directly to a monied covered call in this high implied volatility underlying (121%) with a mildly bullish delta metric. Now that I look at it, the 10 short put (25.78 delta) in October has a better max (1.03) with similar delta metrics should you want to go that route.
CRON breakdown (or out)let's see what kind of a move CRON is going to have here. cannabis has been on a run, does it continue?
CRON notesWatching it on two hour chart seems like today's action was centered around where it close up at around. Trend is still up as it broke up out of an ascending triangle on the weekly chart. I still think pot stocks are in a bubble and they will continue to go higher in price. For options traders it has already breached it's expected move for the week, with the top being 11.19 for the week. Could be pulled back to that area or we are looking at a 3 sigma move
CRON stock Strangle Strategy optionsWe see CRON stock parabolic run during the past two weeks. Perfect set up for sell strangle options strategy
Sell Oct 19 17.5 Call and 7.5 put for 1.18 credit with 4 contracts. Max Profit: $442
Propbability of profit: 73%
Take profit at 1/3 of credit and stop loss at 2X of credit
$CRON move will retraceAs much as I am bullish the sector and the name, this move is just a little too much too fast.
IMO the 129% move in a few sessions will need to be retraced.
The FOMO of the $STZ investment in $CGC is being felt and the "rumor" of $DEO shopping around, be it true or not will get faded eventually. Keep in mind that $TLRY is reporting tomorrow and with a mkt cap of $4.5B or more, the numbers will not substantiate that.
Me thinks that there will be a swift move down to the 10s if not lower. Looking to cover around 200ma on 60min and/or gap closes.
Playing this via puts for Sept21'18
Would also look at buying longer dated calls once there is a retrace. Again, bullish the name and the sector but not oblivious to break neck moves.
Citron Case Study: CRON targeted by dubious short-attackI like the clean horizontal support/resistance and patterns on this CRON chart. I don't have much to say about the technicals as the news and hype (both positive and negative) are the main factors driving the price here. The technicals are helpful, however, in giving targets for buys and sells trading the news/hype.
CRON tanked on a hit piece by Citron Research/Andrew Left with a target of $3.50 alleging securities fraud.
Citron/Left apparently has a history of exposing real fraud and doing short reports on such companies, but is currently in a bit of credibility crisis after being fined by the Hong Kong Market Misconduct Tribunal and banned from trading Hong Kong securities for five years due to what they ruled was a sloppy short-attack report on Evergrande (a report that was quickly refuted by Deutsche Bank and other institutions) that improperly understood Hong Kong accounting rules. (His appeal of the fine/ban failed as well.)
The Tribunal wrote in their report that "no evidence was placed before the Tribunal to indicate that he chose to obtain expert advice on appropriate regulatory restrictions, especially applicable accountancy standards, to which Evergrande would have been subject. If what was sought was a carefully weighed, objective analysis, as opposed to one being employed essentially as a short selling weapon, the decision not to seek advice was, in the judgment of the Tribunal, a rash one." Sadly this seems to me to be a very good description of a subset of Citron's reports, less of what appears to the judgment of reasonable observers to be an honest, even-handed report and more of a "short selling weapon" meant to trade on Left's reputation to tank stocks in the short term for short term profits.
Citron's marketing of their Evergrande short-thesis report alleged, "This research and analysis, complied over several months, presents the conclusion that HK:3333 (Evergrande) is essentially an insolvent company that has consistently presented fraudulent information to the investing public. We prove this conclusion in the following presentation. Evergrande is not a story about the 'China real estate bubble'; rather it is a tale of a company who has abused the capital markets as well as the generous lending of the Chinese Government in order to enrich one man, aggrandize his personal ego and support his pet projects. Bribery, excessive spending, and off-balance sheet transactions are the foundation of Evergrande’s financials."
During the tribunal hearing, Left's lawyers declined to present any evidence substantiating those wild claims of bribery and other outrageous fraudulent behavior. Thus the tribunal focused mostly on the accounting allegations against the audited company financials. Doing so seemed rather generous as unsupported allegations of criminal bribery are very serious from a moral perspective, if not a legal one.
The second big hit to Citron's credibility came after Left called a short on SQ around the $45-47 range on 30-Apr-18 with a "short-term $30". The huge volume spike and price action surrounding the Twitter short-call at 17:53 UTC hints strongly at front-running short sales (or maybe he released in other venues before the surviving Tweet) that briefly dipped the price. However, the high volume of SQ means Citron could not move the share price like they have in other cases and the dip got quickly bought and that was the lowest SQ has been since . It closed at $88.64 last Friday, up 93% from the short call.
CNBC Fast Money did a pretty good job interviewing Left and factually taking apart his central headline allegation against Cronos of securities fraud (though I'm dubious of the consistent platform they give him). Watching their segment is what prompted my investigation. (I had previously uncritically RTed Citron's report, which I'm now ashamed of.) I especially appreciated CNBC highlighting that the voluntary recall of the cannabis in Germany was only 1 KG of product (a very small fraction of their output) because it failed its final microbe test. (It had passed earlier tests by independent labs. It only failed a later further precautionary test. Microbe tests test for the presence of E. coli, salmonella, and other yeasts, molds, and bacteria which can contaminate products in transit as well as during production. This is further supported by the fact that multiple tests are done along the supply chain.) Citron alleged that, "Without disclosing to investors or to the SEC, their product got recalled in Germany for Microbal contamination Cronos raised $100m just a few days later on Mar 21, 2018, In our opinion that is securities fraud".
In this allegation, they included a link to the source article . I copied and pasted the URL into my browser (because even though the URL was blue and underlined, it was not clickable). The URL led to a 404 error, so I could not initially view the source of the fact which Citron interpreted as securities fraud. I am an IT professional, so I spent about five minutes playing with Google trying to get a cached version of the article which I assumed had been removed. I finally discovered thanks to Google's help that the article was very much alive, it's just the URL Citron gave was incorrect. When I pasted the URLs (both the correct URL and the Citron version) into a text editor to view them side by side, they appeared identical. I was mystified why one worked and the other did not. So I did a character by character analysis of the URLs in Google Sheets and was shocked when I found what they had done. They had replaced the standard ASCII code 45 hyphen with the Unicode 8208 character. They are visually identical, but web servers view them as different characters thus different URLs, thus the 404 not found error. It is possible that this swap of characters was done inadverdently without human intervention, but I was unable to replicate the character-substitution when I pasted the URL into Microsoft Word and converted to PDF (as clues in their PDF suggest they did). (They also added an ASCII 10 Line feed character in the middle of the URL in a different place than the natural word wrap in the PDF, but Google Chrome automatically corrects that error upon pasting into the address bar.)
After my struggle, I was able to read the source article and immediately realized why it was very advantageous to Citron's short case to keep most of their report's readers from seeing the source article. The source article made it quite clear that the recall was only of a single KG of product and was totally immaterial to their financials and operation. Ironically if they had proactively revealed such a teensy operational blip, Cronos might have rightly fallen under suspicion for manipulation for trying to make something out of nothing.
I found the case study on Evergrande above very intriguing as Left followed the same playbook for both Evergrande and Cronos. In both, he made very dramatic allegations of hiding and obscuring material financial information in a fraudulent and criminal way. In the case of Evergrande, the Tribunal's discovery revealed how Left made his short trades. He accumulated a short position in the months leading up to his short-attack hit-piece report. He released his report in the Hong Kong morning and cratered the stock by 20% in intra-day trading. He covered his entire short position the day he released his report. In the CNBC interview about Cronos, the very sharp Melissa Lee's opening question was whether Left was still short or whether he had already covered. Left said he's still short, but not by how much. Lee then returned to the question at the end of the segment asking for specifics on whether he's covered most of his short or not. Left tried to evade and brush it off as irrelevant (which it clearly wasn't, money where mouth is and all) but when Lee followed up, he admitted he had partially covered, using subjective terms to describe the amount of his covering rather than objective percentages.
It is also interesting to me how Citron's short-attack on SQ failed so badly (classic bottom shorting) while their attack on Cronos was so successful to the tune of a ~30% cratering over two days. Part of the answer lies in the fact that SQ's average daily volume of ~$928m vs. Cronos's average daily volume of ~$88.5m because lower liquidity/volume issues are easier to manipulate. I would also guess that the percentage of easily manipulated and emotional retail investors is quite a bit higher in Cronos while the percent of institutional investors was higher in SQ--institutional investors who tend to trust their own research above that of someone like Left who is known to be a self-interested short-attack person who has been convicted by Hong Kong courts of issuing "rash" reports that were not backed by facts. Given Left's history, it is surprising to me how positively the financial press covers him. I suppose when you do a genuinely good job taking down several reviled, shady corporate villians, you accrue a lot of brownie points to spend on less factually sound, but potentially very profitable short-attacks.
It was also interesting to me how when pinned down on the headline-grabbing "securities fraud" allegation in the CNBC interview, Left kept quickly pivoting from an allegation of wrongdoing to simply opining the company is overvalued based on EPS and revenue and structural profitability issues. On this he may be correct and the case he makes there is far more compelling than allegations of securities fraud. Perhaps he judged his valuation case would not get a fair hearing without a dubious clickbait headline alleging securities fraud.
As I did a quick skim of Cronos's financials, here are a few things that stood out to me:
Their shareholder dilution is crazy. They keep raising money through selling shares. Current EPS will keep being diluted through convertible debt and whatever other instruments they're using.
Their current price to revenue is abysmal. Analyst estimates make clear that they see something in the company that will lead to $0.12 EPS next FY, up from $0.01 diluted EPS in 2017. Obviously Cronos is undergoing massive growth. Left makes the case that Cronos' cost structure cannot be profitable as margins are squeezed. I have not done the DD necessary to understand whose estimates are more likely accurate. I know current earnings must be sacrificed for growth and that establishing incumbent market share is highly prized by investors even at great cost, ala Uber. But I don't understand the market dynamics well enough to opine well on this topic.
While Citron's assertion that failing to report 1 KG of MJ being recalled equals securities fraud looks like dishonest bunk, the trajectory of quarterly revenues is concerning and looks like they packed some Q2 2018 revenue into Q1. Q3 revenue will help tell the story.
It's actually in Left's hit piece where I find the best financials-based support for Cronos's price. In his comparison with WEED, he gives Cronos an Enterprise Value to estimated 2019 revenue multiple of 19.6x vs 14.4x for WEED. That reveals the incredible boosted revenues that analysts are expecting for 2019 as massive amounts of capacity comes online, given current EV is $2.59b CAD compared to a measly $4.08m CAD in 2017 revenue. That implies a $132m CAD 2019 revenue, a huge jump from 2017 numbers.
This should not be treated as a comprehensive report on Cronos. It is not. I do not have the time or interest to do a proper deep dive. These are just a few things that jumped out at me as I spectated this little debacle. I have no long or short position in Cronos currently. I am considering setting some lower bids just above support for the Tuesday opening in case this was a dead-cat bounce, but I've not yet decided.
I would say that I don't like the R/R for either long or short where the stock is right now. It's already pumped a lot for a long at current prices and I certainly am not going to short it as we segue into fall MJ stock mania and Canadian legalization. The only way to safely short it in this environment is to have the PR muscle of a guy like Left/Citron to make an big PR attack (however temporary the effects).
Here are two excellent analyses of Citron's short-attack on Cronos, one of which agrees with the fundamental case against Cronos and one which disagrees. Both provide valuable research numbers in a far more balanced way than Citron:
Bullish
Bearish
Next week analysis. DON'T BUY/SELL NOW.Wait for the confirmationI'm interested in short term investment for this stock.
