Daily Chart of the MJ ETF and Ratio Analysis with SPY

 The daily chart of the MJ ETF, which tracks the cannabis sector, reveals an intriguing scenario. Below the main price chart, the ratio line of MJ against the S&P 500 (MJ/SPY) is displayed. This ratio line is currently at a critical support level, one that has historically triggered significant rallies in the cannabis sector.

Key Support Level

The ratio line MJ/SPY is essential for understanding the relative performance of the cannabis sector compared to the broader market. The current level of this ratio line has repeatedly acted as a support zone in the past, marking the onset of notable rallies. This historical behavior suggests that the cannabis sector could be on the verge of another upward move, provided certain conditions are met.

Current Trend Analysis

However, it is crucial to recognize the prevailing trend in MJ. The ETF is still in a downtrend, characterized by lower highs and lower lows. This indicates persistent selling pressure and caution is advised before making any bullish commitments. The downtrend underscores the importance of waiting for a definitive shift in the price structure before considering long positions.

Potential Bullish Signals

What should traders watch for? A shift in price structure would be the primary indicator to look for. This could be signaled by the formation of a higher low followed by a higher high, breaking the current pattern of lower highs and lows. Such a development would suggest that buying interest is starting to outweigh selling pressure.

Additionally, a trendline break from the recent highs on the daily chart could act as a confirmation signal. This break, especially if accompanied by increased volume, would indicate a potential change in market sentiment towards the cannabis sector.

Conclusion

In summary, while the MJ ETF is currently in a downtrend, the ratio line MJ/SPY being at a historical support level is an encouraging sign. Traders should closely monitor for a shift in the price structure or a trendline break as potential bullish signals. If these signals materialize, it could present a promising opportunity to take a long position in the cannabis sector, leveraging the historically significant support level of the ratio line. As always, it's essential to consider broader market conditions and other fundamental factors in your trading strategy.