American Green Inc (ERBB)

[Night_Falls]

Fundamental or Technical Bounce? You Make the Call
Technical indicators are an interesting graphic representation of price action, volume and sentiment but Clay gives a very basic chart "reading" devoid of many significant indicators like Bollinger Bands, OBV, MACD to name a few. His chart reading is spot on and most important, highly objective devoid of emotional sentiment. The 50 and 200 day SMA are arguably the most commonly used indicators and therefore the most reliable but chart reading is mostly for day trading or swing trading.

That said everyone should know the basics of technical analysis and today, ERBB made strong close over the 50 day SMA. The two hammers from the two preceding trading days were a buy signal for chart traders. There will be resistance around the .02 level as profit takers from the low penny range can get out with a 50-70% payday. Today Level 2 was pretty stacked with decent volume asks in the .0175-.019 range so clearing that volume will take some heavy buying. Today's volume was decent but nothing out of the ordinary. The selling today was quite thin giving which helped the rally.
http://stockcharts.com/h-sc/ui?s=ERBB&p=D&yr=0&mn=4&dy=0&id=p84514984508

But here's what the technicals don't tell you. American Green's president made some bold operational claims at the Cannawebcast yesterday (Sept 30). Estimates of 500 machines by April 2015, as Shearin stated as an achievable goal, is compelling for a fundamental "investor" (as in someone who is holding for an indeterminate time frame). Shearin also talked about aggressively protecting the vending IP and expressed a positive outlook on not too distant earnings reports. To add fuel to yesterday's fundamental bonfire, American Green announced today the hiring of in-house counsel, Jerry Chesler, an attorney who has connections to a large network of cannabis industry contacts. By all means American Green appears hard at work developing an industry leading company and brand.

In the end, technical and fundamental indicators are like the nature versus nurture debate. Both have a role in how ERBB performs, and all stocks because some participants are buying or selling based for both technical or fundamental reasons. In my opinion, today was an entry point for many traders who expect this to pop over .02 based on the bullish hammers on the chart from Monday and Tuesday. Also the next 3 months are cyclically the best time to buy MJ stocks. A 4 year chart shows the last quarter of the year is the low in most MJ equities and the first quarter of the year is when they pop. Swing traders will be setting up those positions over the next three months. I think some gamblers may be placing bets on the upcoming November elections.

Finally, I also think people are realizing ERBB is becoming a viable company. The progress since April is quite stunning, even more since a year ago this time. Two Zazzz machines are operating with signed leases for about a dozen more to be placed in October. The company has patented IP for a very broadly defined application for biometric authorization of machines that dispense controlled substances. Dispensary management services with the help of successful dispensary owners like Greg Honan....cultivation equipment and nutrients.....a brick and mortar retail hydro shop in the heart of the Emerald Triangle....I almost wonder if American Green has secured financing from venture capital to assist with this aggressive expansion

Here the issue, how much is this really worth? This market is so new. Sure hydro shops have been around but they have never been able to operate with specific purpose of catering to the MJ clients. Who knows if a new agricultural revolution won't breakout with home gardens expanding to the mainstream? OGTea...smaller Jurassic Units for personal use.....? And there's the Zazzz machines? Who knows about that potential? I've done some number crunching and with 500 machines by 2015, I come up with estimates between $5million to $100million in revenue.

ERBB has numerous obstacles to overcome, least of all being the legalization of MJ. The share structure is bloated but Shearin has stated a reverse split is not on the table for now. Financing from traditional means is unavailable so access to capital is stunted, leading to share grants to raise funds which causes some dilution and in turn those high volume shareholders will be quick to sell during drops in order to protect profits. ERBB also trades in the Pink Sheets so this is a gamble.

I'm definitely long ERBB despite the concerns. I don't trade or invest in the pinks with the exception of MJ stocks, been doing it for about 4 years now and have done well. American Green and ERBB have matured into a strong play. Absent serious fundamental issues, I see ERBB hitting .20 and possibly beyond a $1billion mark by end of year 2015, maybe sooner.