Canopy Growth: This Is Why Marijuana Stocks Got Crushed Today

S&P 500: Stock Markets DownMore Downside for Canopy Growth and Marijuana Stocks? 

Canopy Growth Corp (TSE:CGC) continues its volatile streak by dropping 11% after registering large gains (along with many other marijuana stocks) a week ago.

Canopy growth has had a wild ride recently. It rose by nearly 20% on November 14 alone, followed by several steep climbs and dives before Monday’s drop brought it back to about the same value that CGC stock had by November 14’s end.

Over the past month, Canopy Growth stock has jumped 63% in what has now become one of the hottest industries on the market: marijuana production. The rush that marijuana stock has created has been such a driver in the market that some analysts are peeved with the attention that marijuana stocks have garnered.

“It’s all about all things marijuana,” complained one trader, who declined to be identified. “All the hot money is flying into those stocks, and so we’re kind of stuck here in neutral,” he said, referring to a non-marijuana issuer who has seen its volume decline dramatically over the past two weeks. (Source: “Marijuana stocks stealing all of the action in Canada by unprecedented volumes,” Financial Post, November 18, 2017.)

And the numbers back that trader up. Since October 15, marijuana stocks have dominated the TSX Venture index, averaging around 10 per cent of the volume on the total exchange.

But, despite definite smoke being generated by marijuana stocks, that doesn’t necessarily mean there’s a fire to be found.

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Some investors are choosing to steer clear of marijuana stocks due to the potential volatility in the industry.

Take California, for instance. On November 8, the richest and most populous state in the U.S. voted to legalize marijuana, which is seen as a huge boon to the marijuana industry.

Done deal, right? Not quite.

Due to the classification of marijuana as a Schedule 1 Drug (along with heroin), differing state and federal drug laws, questions about the Donald Trump presidency will mean for the drug, and a variety of other factors, marijuana stock is by no means home-free from controversy or potential pitfalls. (Source: “Medical Marijuana Is Legal in California. Except When It’s Not.” The New York Times, November 21, 2016.)

Which is all to say, the jury is by no means out on Canopy growth or marijuana stock more broadly. See a great analysis here on when just might be the best time to spark up on marijuana stock.