GW Pharma Trades Near Support After FDA Approval

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GW Pharma Trades Near Support After FDA Approval

GW Pharmaceuticals plc (GWPH) shares quickly surged more than 5% before the market started, but then fell back as traders “sold the news.” On Monday afternoon, the U.S. Food and Drug Administration (FDA) authorized the company’s cannabinoid-based Epidiolex for the treatment of uncommon pediatric seizures. In addition to being the first FDA-approved cannabis, Clarivate predicts Epidiolex’s sales might reach $1.2 billion by 2022. Goldman Sachs retained its Buy rating and $188.00 per share price objective on GW Pharmashares, while Bank of America concurred.

Despite the FDA permission, the stock dropped more than 4% on Monday and has been erratic thus far on Tuesday. The company’s $3.65 billion market valuation on $10.4 million in sales last year suggests that investors may have already factored in possible advantages from the approval. (See also: The United States Approves the First Cannabis-Based Drug.)

GW Pharma shares fell from pivot point support at $152.09 and the 50-day moving average at $148.05 before rallying on Monday afternoon and dropping again on Tuesday morning. With a value of 40.46, the relative strength index (RSI) looks to be rather neutral, but the moving average convergence divergence (MACD) is in a severe downturn going back to early June.

Traders should look for a breach from S1 support at $140.01 to the 200-day moving average at $126.86 to close the bearish gap that has been open since mid-April. If the stock recovers from S1 support levels, traders may see a move back above the pivot point and 50-day moving average, potentially retesting recent highs around $165.00. Given the bearish MACD reading and the neutral RSI reading, the most probable possibility is a breakdown. (For more information, see: What Stocks Are on the Marijuana Index?)

  TSLA Option Traders Trust in Musk After Earnings provided the chart. Except via passively managed index funds, the author has no investment in the stock(s) mentioned.

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