CannTrust Holdings Inc A Bounce Play Opportunity

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What happened to CannTrust today?

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Shares of CannTrust Holdings Inc (TSE:TRST) (OTCMKTS:CNTTF) ( FRA:C9S) has experienced a bearish close at $8.01 (CAD) today, showing a 7% loss.

However, it represents an opportunity for short term traders who are interested in oversold play in the Canadian cannabis sector. It also gives investors an attractive entry point.

 

Why the drop? (Assumption)

We think CannTrust’s service provider, Forum Financial Corporation, is the reason for this violent drop of share price today.

Forum Financial Corporation receives cash and common shares from CannTrust for its service regularly. It makes sense for them to finally cash out some of the profit.

The screenshot shows the two transactions they had last week, we are assuming they did some selling today as well.

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The Play

The 15 Minutes Chart

trst trade 2

Last time we had our RSI briefly went under 20, we got a 7% Bounce. Well, that’s only if you caught the bottom and sold at the top perfectly. But you will likely get a 3-4% return if you scale in and take profit on the way up.

The 1 Hour Chart

trst trade 1

Overall, the hourly chart shows there is a good chance we are going to get a solid bounce tomorrow morning. However, anything can happen before the market open. There are 3 things that can ruin the setup in our opinion.

  1. A gap up. It will cool down the RSI make it no longer oversold.
  2. Bad news. Will there be any bad news before the market open?
  3. Sector-wide correction. Canadian cannabis stocks are known to be easily influenced by the sector leader, Canopy Growth Corporation (TSE:WEED) (NYSE:CGC) (FRA:11L1); any bearish action on Canopy might have impact on Canntrust’s price action as well.

The best way to play this setup will be scaling in your trades block by block. Say you are willing to put 1000 shares into this trade, buy 250 shares in each order until you reach 1000 shares. Not only it gives you the opportunity to get a better average cost, it also allows you to further monitor the price action.

 

The Fundamental 

For investors that are interested in CannTrust Holdings Inc (TSE:TRST) (OTCMKTS:CNTTF) ( FRA:C9S), you can begin your DD by checking out this video they did with Midas Letter.

 

The COO of CannTrust also did an interview with BNN Bloomberg last week:

https://www.bnnbloomberg.ca/video/monumental-canntrust-president-reacts-to-senate-passing-cannabis-bill~1412813

Happy trading/investing!

Full Disclosure:  We have no position in CannTrust stock but plan to initiate a long and short term trade position in the next 72 hours. We are long Canopy Growth Corporation. We have no business relationship with any company whose stock is mentioned in this article. You should always do your own research before making a trade and/or investment. 

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