The Motley Fool brought to our attention a new public pot stock—The Green Organic Dutchman (TGODF)—that, according to them, is on track to becoming “Canada’s fourth-largest producer.” Here’s how they figured this calculation: Aurora Cannabis may produce 570,000 kilograms at peak production. Canopy Growth Corp is capable of producing roughly 500,000 kilos.  Aphria is at 255,000 kilos. The Green Organic Dutchman is estimated to have an annual production capacity of 130,000 kilos, making it the fourth-largest producer.

We’re not outright recommending you purchase this stock. But if you are looking into it, here are a few technical tips that might help:

Green-Organic-Dutchman-296x300 Green Organic Dutchman: A New Major Player in Canada’s Cannabis Industry

Following its peak at $7.56, the stock’s price retraced to around the 50% Fib level of $4.55 at (1). Notice how the selling volume of the decline is far lower than the buying volume that lifted TGODF’s price to its peak.

Following its swing low, price moved upwards on low volume, establishing a swing high at (2). Now we have a swing “local” swing high and swing low, which indicates that the stock price may be forming a base.

What you want to pay attention to is what’s happening now at (3) and the volume accompanying it at (4). If you were to enter a long position, the wiser choice may be to enter upon a breakout of (2) given that the volume at (4) shows a comparable surge in buying interest. You would also place a stop below (1). Ideally, you would want to see a follow-through in which volume is correlated with price. The risk of course, is that if the breakout ends up false, you would get stopped out at (1).

A more aggressive approach, one that is closer to your stop at (1), would be to place a market order to buy at the high of a “local” low bar. This hasn’t really happened yet, as the three previous declines seemed to stop at the same local support level.

Either way, its important that if you do enter this trade, that you position size in such a way that matches whatever predetermined risk percentage (R%) you set for your trade.

 


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