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Thursday, December 3, 2020

Why Auxly Cannabis Group Inc (OTCMKTS:CBWTF) Could be Set Up to Squeeze

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One stock that catches our eye as particularly interesting right now is Auxly Cannabis Group Inc (OTCMKTS:CBWTF). The stock has been pulling back, but with a slow-burn cadence on the charts that suggests it may be sea-worthy for new interest as it fails to crack under pressure, which may be the push of new short interest, potentially setting up the possibility of a squeeze ahead.

Helping to round out the picture, the company just announced that its wholly-owned subsidiary, Robinsons Cannabis Inc., has been granted standard cultivation and processing licenses by Health Canada pursuant to the Cannabis Act and Cannabis Regulations. According to the release, the licenses give Robinsons the ability to begin cultivation at its fully constructed 27,700 square-foot facility in Kentville, Nova Scotia, which was purpose-built to produce high-quality cannabis.

Auxly Cannabis Group Inc (OTCMKTS:CBWTF) trumpets itself as an investment company that seeks to provide investor returns through streams and capital appreciation in the Canadian cannabis industry.

The company operates as a cannabis streaming company. It provides funding for cannabis facility expansions, operations, and initial construction in exchange for minority equity interests and a portion of the cultivation production.

The company was formerly known as Knightswood Financial Corp. and changed its name to Cannabis Wheaton Income Corp. in May 2017. Cannabis Wheaton Income Corp. was incorporated in 1987 and is based in Vancouver, Canada, and became known as Auxly Cannabis Group Inc over recent months.

According to company materials, “Auxly Cannabis Group is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. Our mandate is to facilitate growth for our partners by providing them with financial support and sharing our collective industry experience. Our partners all have different visions, voices and brand values, and all share a common goal—to build a world-class industry based on ethics, diversity, quality and innovation.”

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As noted above, CBWTF just announced that its wholly-owned subsidiary, Robinsons Cannabis Inc., has been granted standard cultivation and processing licenses by Health Canada pursuant to the Cannabis Act and Cannabis Regulations.

Even in light of this news, CBWTF has had a rough past week of trading action, with shares sinking something like -3% in that time. That said, chart support is nearby and we may be in the process of constructing a nice setup for some movement back the other way. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -4%.

Moreover, the stock has seen interest climb, with an increase in recent trading volume of 12% beyond what we have been seeing over the larger time frame.

Hugo Alves, President of Auxly said: “This is a big milestone for one of our key subsidiaries and member of the Auxly family. We know that Andrew and his team are going to produce some of the best cannabis flower available in Canada and we can’t wait to share it with Canadian consumers. Robinsons is all about an unwavering commitment to quality. We hope to show cannabis connoisseurs, who to date have been generally disappointed with the flower offerings in the market, that passionate artisans operating in the regulated industry can produce an incredible product that reflects their pride and craftsmanship.”

At this time, carrying a capital value in the market of $365.74M, CBWTF has a significant war chest ($215.1M) of cash on the books, which must be weighed relative to virtually no total current liabilities. CBWTF is pulling in trailing 12-month revenues of $1.2M. In addition, the company is seeing recent top-line growth, with sequential quarterly revenues growing at 26.4%. This may be a very interesting story and we will look forward to updating it again soon. Sign-up for continuing coverage on shares of $CBWTF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $CBWTF, either long or short, and we have not been compensated for this article.

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