We’ve been analyzing cannabis stocks from a mid-term investor perspective, covering major players like Aurora (NASDAQ:ACB):, Canopy (NASDAQ:CGC):, and High Tide (NASDAQ:HITI), all listed on major exchanges.
Now, we’ll shift focus to the first case of a cannabis stock traded OTC, which is an extended situation for cannabis stocks.
Despite being a major industry player in the U.S., Curaleaf Holdings INC’s stock (OTC:CURLF) has been on a prolonged downtrend, dropping from a high of $5.50 in early 2023 to its current low near $1.70.The stock is traded over-the-counter (OTC), meaning it is not listed on major exchanges like the NYSE or NASDAQ, which on occasion results in lower trading volumes and less liquidity due to reduced visibility and accessibility for investors.
But this isn’t the case with Curaleaf, which normally trades with sound volumes. While most companies we’ve covered so far are recovering ground this April-May 2024, Curaleaf seems not to have found the bottom, having dropped 75% from its 2022 high of over $8.
Price Action
In the long run, price action shows three major situations:
-
2022-2023 Peak to Downtrend:
The stock’s decline from its 2022 peak aligns with broader industry challenges, likely tied to the cannabis sector’s regulatory and growth constraints. It reflects diminished investor confidence in Curaleaf’s growth potential or profitability. -
Mid-2023 Stabilization:
The brief consolidation during mid-2023 near the $3.50-$4.00 range showed temporary relief, possibly due to short-term news or industry-wide developments. However, the inability to break above resistance levels led to continued selling pressure. -
Late-2024 Breakdown:
The recent push toward $1.75 indicates intensifying bearish sentiment, possibly exacerbated by external market conditions or specific company challenges. The lack of a significant bounce suggests the market remains cautious about the stock’s prospects.
Chart created using Benzinga Pro
Support Levels, Resistance And RSI
The stock now stands near a critical support level of $1.70.
If this level holds, it could serve as a base for recovery, while a break below it may lead to further declines, potentially toward $1.00. On the upside, resistance levels to watch include $2.50 and $3.00—key barriers that need to be breached for a meaningful reversal.
Additionally, the Relative Strength Index (RSI) indicates oversold conditions, suggesting the possibility of a short-term bounce.
However, without a catalyst, such as improved earnings or regulatory breakthroughs, upward movement may be limited.
Fibonacci Analysis: Recovery Targets To Watch
We will use Fibonacci retracement on the downtrend to look for potential resistance levels on an eventual recovery, potential targets provide a roadmap for investors if the stock starts to regain momentum. Bear in mind, that we are considering that the stock is overly depreciated. But markets are not always rational.
Starting from the early 2023 high of $5.50 to its current low near $1.70, the first recovery target lies at $2.75 (23.6% retracement).
Beyond that, $3.50 (38.2%) and $4.15 (61.8%) mark significant resistance zones. These levels represent potential profit-taking points for short-term traders or confirmation zones for long-term holders awaiting a stronger trend reversal.
Read Also: The Future Of Cannabis: ‘A Tremendous Amount Of Upside’ Despite Challenges Says Curaleaf Executive
Should You Buy Or Hold?
CURLF is trading at historic lows, which may seem attractive for investors looking for a discounted entry point.
However, it's important to consider the following:
- Risks Remain High: The stock's prolonged decline and the broader industry’s uncertainty make this a risky investment.
- Potential Upside Is Limited Without Catalysts: For the stock to recover, Curaleaf would need big news, such as improved earnings, strategic acquisitions or regulatory breakthroughs.
If you already own CURLF, holding might be a reasonable strategy if you’re confident in the long-term cannabis market. Key signs to watch for include:
- Support Holding at $1.70: If the price stabilizes above this level, it could be a base for recovery.
- Breakouts Above $2.50-$3.00: A move above these levels could indicate renewed interest and strength.
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What To Expect In The Near Term
- Downside Risk: If $1.70 fails as support, the price could drop to $1.00 or lower. I would expect this since the stock is overly undervalued.
- Potential Rebound: Technical indicators, like RSI, suggest oversold conditions, a short-term bounce is possible.
COVER: AI-generated image
