The Five Must-Have Pot Stocks for 2021

The Five Must-Have Pot Stocks for the New YearTop Pot Stocks Aiming for New Highs in 2021

The outlook for pot stocks is more optimistic following the election win by Joe Biden. That’s due to the view that the Democrats are more favorable than the Republicans to marijuana legalization.

In 2020, we saw legal pot operators focus on better cost containment and access to financing for capital expenditures. But missing from the restructuring in the cannabis sector was the relative absence of mergers and acquisitions.

My view was that pot companies could further streamline their operations and cut costs via getting bigger.

We finally saw a major development on December 16 after two Canadian pot companies, Aphria Inc (NASDAQ:APHA) and Tilray Inc (NASDAQ:TLRY), announced a merger.

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The proposed deal would see the bigger of the two companies, Aphria, own 62% of the merged company but retain the Tilray name. Once the deal is completed in the second quarter of 2021, the new Tilray will be the largest pot company in the world, based on revenue.

Moreover, the proposed merger could trigger increased merger-and-acquisition activity in the marijuana sector, driven by the need to build scale and cut costs.

Technical Analysis of My Top Five Pot Stocks

Tilray Inc

I’m going to start with the current star of the pot stock world, after its merger news. Tilray Inc, with a current market cap of $1.3 billion, will be much bigger after the merger. The company’s new valuation will likely exceed $3.5 billion.

Tilray’s stock chart shows a downward trendline from June, after a strong rally from $2.43 during the March sell-off to the $12.00 level in June. TLRY stock failed to hold, and found itself in a downward channel until the trendline resistance breakout in early November after the U.S. election.

With the move, Tilray stock recovered to its 200-day moving average (MA) and is now well above its 50-day MA.

Chart courtesy of StockCharts.com

TLRY stock again failed to hold until it surged by 24% on the merger news. Tilray stock, however, remains well below its 52-week high of $22.95.

We could see renewed buying, as TLRY stock appears to be on the verge of displaying a golden cross pattern, a bullish situation in which the 50-day MA breaks above the 200-day MA.

Tilray stock’s comparative gains versus its peer group (as of December 22) were underwhelming on a year-to-date basis, but that has improved over the short term.

Time Period Tilray Stock Canopy Growth Stock Curaleaf Stock Trulieve Stock Vireo Health Stock
One Month 8.1% -3.9% 22.7% 14.6% 20.4%
Three Months 57.7% 61.5% 74.9% 75.5% 39.4%
Year-to-Date -50.6% 22.9% 100.5% 166.9% 23.8%

While TLRY stock’s technical chart had been bearish, there are now some positive signs, as the stock looks to hold after the breakout of trendline resistance following a bullish ascending triangle.

Note that the current technical view doesn’t incorporate the merger with Aphria. Looking ahead, a sustained breakout at $10.00 could see Tilray stock move toward $15.00 and $20.00.

Near-term technical opinion: Bullish.

Canopy Growth Corp

Canopy Growth Corp (NYSE:CGC) is the biggest player in the legal pot segment, based on market valuation.

After struggling in early 2020, Canopy Growth stock recently surged to a new 52-week high, just below $30.00. CGC stock has tripled from its March low, up 61.5% over the last three months and 22.9% in 2020, to a market valuation of close to $10.0 billion.

Canopy Growth stock was drifting in a consolidation channel between $17.00 and $25.00 from October 2019. Then the COVID-19 pandemic surfaced and CGC stock plummeted to $9.00 in March 2020.

Chart courtesy of StockCharts.com

Canopy Growth stock’s rally has been impressive, highlighted by the breakout of a subsequent consolidation channel of $14.00 and key resistance of $20.00.

CGC stock is easily above both its 50-day and 200-day MAs. A golden cross pattern emerged in November, which was followed by the breakout of the trendline resistance. This was supported by strong relative strength and a bullish moving average convergence/divergence (MACD).

In the near term, there could be an opportunity on price weakness, as indicated by weakening relative strength and a MACD sell. On the upside, once $30.00 is taken out, Canopy Growth stock will move toward $40.00.

Investors might want to consider accumulating CGC stock on price weakness. My view is that it will reward patient investors.

Near-term technical opinion: Bullish.

Curaleaf Holdings Inc

Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF) is the second-largest pot stock, based on a market valuation of around $7.9 billion.

Curaleaf stock traded at a record $13.09 on December 18, up 100.5% in 2020, representing one of the top gainers.

CURLF stock staged an impressive rally from its March low to well above its pre-COVID-19 level. The strong trendline was supported by strong relative strength and MACD.

Chart courtesy of StockCharts.com

Curaleaf stock’s push above its 50-day and 200-day MAs was driven by a golden cross pattern in July. The stock recently broke out after an ascending triangle pattern that was supported by strong relative strength and a MACD buy.

CURLF stock’s breakout at resistance at $8.00, $9.50, and $12.00 was bullish. A sustained move could drive Curaleaf stock toward $16.00.

Near-term technical opinion: Bullish.

Trulieve Cannabis Corp

Trulieve Cannabis Corp (CNSX:TRUL, OTCMKTS:TCNNF) has been the top-performing pot stock since the sell-off in March, as shown on the below chart.

You’ll rarely find a more bullish stock chart. Trulieve stock has been on an impressive rally since trading below $6.00 in March. TCNNF stock is up a sizzling 438% from its March low, and it was up 166.9% in 2020.

Trulieve stock easily broke above resistance at $10.00 to $16.00 after the emergence of a golden cross pattern in May.

Chart courtesy of StockCharts.com

TCNNF stock broke to a record $33.13 on December 17 after displaying a bullish ascending triangle pattern. The rally and breakouts were supported by strong relative strength and MACD.

The near-term technical picture for Trulieve stock is bullish, but overbought. This implies a potential retrenchment toward its 50-day MA and low-$20.00 level, which would be a great opportunity for investors.

Near-term technical opinion: Bullish.

Vireo Health International Inc

While I have presented four of the biggest pot stocks, there are numerous smaller players that offer higher risk, but also the potential for higher rewards.

That’s the case with micro-cap Vireo Health International Inc (CNSX:VREO, OTCMKTS:VREOF), which has been on an impressive uptrend since trading at $0.20 during its March low.

The following chart shows VREOF stock in a strong bullish trend characterized by multiple breakouts supported by strong relative strength and MACD. Vireo Health stock is looking for direction after an ascending triangle breakout.

Chart courtesy of StockCharts.com

VREOF stock is up 39.4% over the past three months. It recently traded at a 52-week high of $1.43, which is still well below its record $5.06 in April 2019. Since its 52-week high, Vireo Health stock has been drifting in a tight sideways channel above its 50-day MA.

For those with risk capital, VREOF stock could be an ideal trade. A rally could trigger a move toward key resistance at $1.50 to $2.00.

Near-term technical opinion: Bullish.