Emerald Health Therapeutics Inc (OTCMKTS:EMHTF) is gearing up for a potential breakout if recent price action activity is anything to go by. A resurgence in share price activity follows a whirlwind that saw the stock shed a substantial amount of market share in 2018. The stock has since bounced back and showing signs of climbing the ladder on renewed investor interest.
Emerald Health Price Analysis
Emerald was on the receiving end in 2018 as the broader cannabis sector came under immense short selling pressure. However, fortunes have changed, and the broader industry has bounced back helped by an inflow of capital and business in the sector.
As marijuana has continued to garner favorable public opinion, with recreational use legalization in Canada, so has, Emerald continued to bounce back from one-year lows. The stock’s sentiments in the market have received a boost on the company announcing the expansion of a cannabis cultivation license for its Pure Sunfarms joint venture.
The company is also fresh from closing a joint venture for the distribution of endocannabinoid supporting products, to natural health products stores and pharmacies. Investors have also taken note of the company’s bid to strengthen its production capacity.
A 50% rally from one-year lows attests to growing investor confidence about the stock’s prospects. With the stock currently trading at the $2.50 level, it faces immediate resistance at the $3.20 level, above which it could make a run for the $4.40 a share level, a critical resistance level.
A rally followed by a close above the $4.40 level would mark an end to a bear run that had threatened to plunge the stock to all-time lows. Above the critical resistance level, bulls should be in control and could push the stock to 52-week highs. On the downside, sell-offs should experience strong support at the $1.50 level, below which the stock could continue edging lower in continuation of the long-term bear trend.
Given that the broader cannabis sector has turned bullish, Emerald Health remains well positioned to continue rising after the recent spike on improving fundamentals.
About Emerald Health
Emerald produces and sales cannabis in Canada. It is also a licensed producer and owns a 50% stake in Pure Sunfarms through which it generates most of its cannabis produce. The joint venture is in the process of converting a 1.1 million square foot greenhouse into a cannabis production center.
Expanding Production Capacity
Emerald Health is one of the stocks that is experiencing a spike in activity in the market on the broader cannabis sector turning green. The company’s cannabis production capacity has received a significant boost on Health Canada approving the sixth amendment to the company’s cultivation license. The approval paves the way for the expansion of Pure Sunfarms cannabis production area by 138.000 square foot.
Emerald Health cannabis, production capacity has also received a boost on the conversion of 206,000 square feet of growing area under review by Health Canada. The amendment expands the production area to over 1.03 million square feet.
“We expect Pure Sunfarms’ leadership in optimized greenhouse cannabis growing to achieve attractive quality, yield, and profitability. We expect this facility to be in full production in the first half of 2019. With Emerald’s supply agreement for 40% of Pure Sunfarms’ 2019 production along with our Quebec and hemp operations, we are strongly positioned for quarter to quarter sales growth,” said CEO Avtar Dhillon.
Emerald Health has also closed Emerald Health Naturals joint venture with Emerald Bioceuticals (EHB). The company has consequently invested $5 million for a 51% stake in the joint venture. With the investment, the company is to gain access to EHBs award-winning product line made up of nutritional supplements that support the body’s endocannabinoid system.
Investor sentiments on Emerald Health are slowly inching higher if recent price action activity is anything to go by. The stock has already bounced back by more than 40% from all-time lows, backed by positive developments on operational efficiency as well as the broader cannabis sector.
A move by the company to strengthen its production capacity in Pure Sunfarms is a development that affirms long-term prospects. For starters, the company remains well positioned to produce sufficient cannabis to meet the ever-growing demand with recreational use legalization. Management has already reiterated they expect sales growth in 2019.
For early movers, Emerald is an exciting pick as it is currently trading at a discount but with huge prospects of powering higher.
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Disclosure: We have no position in EMHTF and have not been compensated for this article.