We appear to have a potent technical setup in Massroots, which is not a cannabis grower, but describes itself as “one of the leading technology platforms for the cannabis industry”. We nearly went for it about a week ago, but were deterred by the still falling moving averages and still relatively high downside volume, and it has since reacted back. On further inspection of the latest charts however, it looks like an important reversal pattern is completing that could soon lead to a powerful advance.
What also makes the Massroots setup potentially explosively bullish is the paradox of the share price having halved (net of fluctuations) from its inception in April of 2015 to the present, whilst the company’s userbase has trebled from 300,000 to 900,000, and this was not due to stock dilution, as the float of stock available is still only at 19 million shares. So it now looks way undervalued relative to its userbase. Whilst it is understood that a userbase doesn’t automatically translate into a revenue stream, the bigger the userbase, the more credibility the company has, and the more leverage it can bring to bear to secure necessary liquidity – and the more attractive it becomes to predators, who may seek to gobble it up.
The latest reaction and bounceback on Friday makes it clearer what is going on now in this stock. On the 3-month chart we can see that a Head-and-Shoulders bottom appears to be completing, with Friday’s intraday low probably marking the Right Shoulder low. Given the low number of shares available on the open market, it is clear that the persistent heavy volume of recent weeks signals a rapid rotation of ownership, from weak to stronger hands, and the new owners are much less likely to be inclined to sell at these low levels until they have turned a profit. If this interpretation is correct, then it is obvious that we are at a great entry point right now, especially as we can limit risk by placing a stop beneath the just tested support at and above the Right Shoulder low at $0.48, at say $0.475. The real fireworks will start in this stock once it breaks above the resistance at the upper boundary of the Head-and-Shoulders bottom.
Whilst the company’s database has grown in a steady and impressive manner for several years now, the trend of the share price from its inception in April 2015 must have been a disappointment for shareholders as we can see on the 2-year chart, who were dealt another blow when it was refused permission to trade on the NASDAQ back in May
. The NASDAQ’s position on this was not unreasonable, since although the company met all its other requirements for listing, it felt it could not go ahead with it because the industry itself remains in defiance of Federal law, despite being widely approved at State level. This impediment is expected to be removed in due course. Thus we have a situation where the stock looks way undervalued in relation to the company’s accomplishments to date and its future potential.
Whilst Massroots stock remains technically in a downtrend, and its volume indicators on its 2-year chart look awful, as we have seen it appears to be marking out an important reversal here – and volume indicators can turn up with the price. The huge volume of recent weeks is also a strong indication that it is in the process of reversing to the upside, and if the legislative aspects of this business improve significantly going forward its upside potential from here is very substantial.
Massroots is rated a strong speculative buy here with a stop at $0.475. If the stop is triggered it may later be bought back depending on the stock’s subsequent behavior.
Massroots Inc, MSRT on OTC, closed at $0.55 on 14th October 16.
Posted at 10.30 am EDT on 16th October 16.