A trader who relied strictly on RSI and didn’t consider some of the record volume or the extremely bullish investor sentiment would’ve missed out on a move from roughly $4.50 to $17 because the stock was ‘overbought’. I think this highlights two important things: First, none of these indicators should be used as the ‘golden’ solution to making profits. Second, nothing is more important than price and volume. The RSI being in overbought levels should start to signal to the investor that they might want to keep watch for a change in price direction (eventually the cannabis industry settled down for a few months) but doesn’t necessarily mean one should sell.
Getting back to the legend, in the second box on the Aphria chart or perhaps simpler now, the box you see above for Canopy we see this:
This indicates that we are viewing the 50 and 200 moving averages in blue and green, withe the Bollinger band based on the 20 day moving average viewed in red. Always check the legends as I am very much liable to change moving averages and indicators throughout this article.
My favourite moving averages for the cannabis sector are the 20 and 50 day moving averages. All things being equal I would much prefer the price of the stock be above or just about to break above those moving averages because I want stocks that are up-trending.
The third box shows the MACD (Moving Average Convergence Divergence):
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