Cronos Group Inc. (CRON) shares fell more than 2% on Monday morning after BMO Capital downgraded the stock from Market Perform to Underperform. The analyst cited a production ramp that is behind other licensed producers and a potentially "elevated" valuation as a rationale for the downgrade. Melius Research analysts also initiated coverage on Cronos stock with a Neutral rating and a C$27.00 price target last week.

The downgrade comes shortly after Altria Group, Inc. (MO) closed its $1.8 billion investment in Cronos announced earlier this year. The investment provides Altria Group with a 45% economic and voting interest in the licensed producer, along with a warrant to acquire additional ownership at C$19.00 per share to bring its total stake to 55%. Altria Group also nominated four directors to serve on Cronos Group's board.

Technical chart showing the share price performance of Cronos Group Inc. (CRON)

From a technical standpoint, Cronos stock moved to the lower end of its price channel following the analyst downgrade. The relative strength index (RSI) moved to neutral levels of around 51.29, but the moving average convergence divergence (MACD) remains in a bearish downtrend that began in mid-February. These technical indicators suggest that the stock could see more downside ahead before regaining ground from a technical standpoint.

Traders should watch for a breakdown from trendline support at $20.80 toward the 50-day moving average and S1 support at $18.54 or a rebound higher toward upper trendline resistance at about $24.00. If the stock breaks down from S1 support levels, the next area of strong resistance is trendline and S2 support at $15.44. If the stock breaks out from trendline resistance, traders could see a move toward R2 resistance at $28.20 on the upside, although that scenario appears unlikely.

The author holds no position in the stock(s) mentioned except through passively managed index funds.