Canopy Growth stock price could double to $2 but risks remain

Canopy Growth (NASDAQ: CGC) stock price has made a strong comeback in the past few days as investors cheer some good news about the pot industry. The shares rose above $1 for the first time since June this year. They have now soared by more than 190% from the lowest level this year.

Positive cannabis news

Canopy Growth, Tilray Brands, Curaleaf and other cannabis stocks have staged a strong comeback in the past few days. This recovery happened after a series of positive news in the industry.

For example, the DEA said that it could reclassify cannabis as a less risky drug. Such action has been viewed positively by investors in the industry. However, analysts at Bernstein warned that the classification will not be the preferred outcome.

Canopy Growth stock price also surged after Biden said that he supported the legalization of weed for medical use. In a separate statement, Senator Chuck Schumer who leads Democrats said that he supports an upcoming legislation in the Senate.

Another bipartisan bill in Congress that seeks to allow companies in the sector gain access to financing is also moving smoothly and analysts believe it will pass. Meanwhile, Canopy Growth said that it would sell the Hershey Drive facility for over C$53 million.

Still, cannabis stock investors should be cautious for now for three main reasons. First, it is still too early to determine how far the legislation in the US will move. It is unclear whether it will pass a deeply divided Congress.

Second, the impact of these actions on sales will likely be less than expected. For one, cannabis is already legal in most states in the US. Finally, historically, a lot of enthusiasm about a sector tends to lead to disappointment. We have seen this in high-flying sectors like artificial intelligence and clean energy technology.

Canopy Growth stock price forecast

The daily chart shows that the CGC stock price bottomed at $0.3560 in July, August, and September. Recently, the shares have moved above the 25-day and 50-day moving averages. The stock has risen above the extremely overbought level of 80. Other oscillators have also been in an upward trend.

Therefore, the outlook for the stock is neutral. More gains could see the shares retest the resistance level at $2.11, the lowest level in July and December last year. This means that the stock could more than double from the current level. However, there is also a risk that the shares will drop and retest this month’s low at $0.3560.