Cann Group Limited (ASX: CAN) is amongst the several ASX listed healthcare companies, working in the medical cannabis space. The company has its own research and cultivation facilities and is aiming to provide access to medicinal cannabis for Australian patients. The first ever medicinal cannabis research licence in Australia was secured by Cann back in February 2017.
On 26th April 2019, the company announced its March 2019 quarterly update, the company highlighted on its non-binding Heads of Agreement (HOA) for the purchase of a site located within the Mildura region. The company intends to build a state-of-the-art facility to cater to the domestic and export markets.
The company had also entered into a five-year agreement with Aurora Cannabis Inc under which Cann would produce GMP processed dry flower at its existing and planned expansion facilities, and Aurora would offtake this medical cannabis until 2024.
During the period, the company completed its independent investment of $250,000 in Emerald Clinics. This was a part of $2.5 million of capital raised by Emerald to support the national roll-out program of its clinics.
On the outlook front, the company is moving ahead with its debt funding plans for the Mildura expansion facility. Simultaneously the company continues to prepare for construction of the new facility.
Production of resin has also been started for Victoriaâs Department of Health as of May 2019, and now regular orders are expected.
On the cash flow front, the company used a total of A$2.77 million of cash for operating activities, and A$6.97 million has been used towards investing activities. No financing activity was undertaken during the quarter. At the end of the reporting period, the company reported net cash of A$62.88 million. For the next quarter, the company had estimated the net cash outflow of A$23.45 million.
Technical Outlook
On the daily chart, the stock is forming a descending triangle chart pattern. A descending triangle pattern is the one which can either reverse the prior trend or continue it, depending upon the direction of the breakout. In this pattern, the stock tends to move in a downward direction with lower highs and almost the same lows.
In simple words when the stock price falls, it falls at the same support level from where it bounces off, but when it rises for a short term (as the market/stock move in waves), it generally does not reach the previous peakâs high.
Daily Price Chart of Cann (Source: Thomson Reuters)
This price action helps to mark a falling trendline, joining the peaks (red line on the chart), and a horizontal support line (green line on the chart), which depicts the triangle. As the stock price falls, due to the falling trendline it keeps on converging in a range till the time both the lines of the triangle meet. This is the time to look out for the breakout signals, with an eye for expansion in the trading volume post breakout.
In the case of Cann, the stock is today trading below its support line at A$2.100 with 367,523 changing hands vs its yearly average volume of 409,287 (as at AEST: 2:07 PM, 3 June 2019), the closing price and the volume activity would be closely watched by the chartists. A close below the support with strong volume could suggest a triangle breakdown.
Stock Performance
The company has a market capitalisation of A$300.58 million, and the stock had touched a 52-week high and low of A$3.6 and A$1.525 respectively. The stock closed at intraday low of A$2.15, as on 31st May 2019. The last one-year return of the stock is negative 30.65%, and the YTD return stands at 7.5%.
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