Marijuana News Today
The marijuana news today is finally injected with some positivity as we saw a massive jump in marijuana stock prices to start the day.
Before we get into the specific stocks that excelled in early-morning trading (although the gains were pretty much across the board), it’s worth examining what we can expect from the marijuana industry moving forward.
We are likely in the midst of a prolonged correction, even if today’s massive stock market rally seems to say otherwise.
The marijuana industry is a nascent one, and therefore highly volatile. Being a relatively young market, the steady doses of hype that have been infused into the industry over the years via the media have only made marijuana stocks more unpredictable, at least on a micro scale.
On a macro scale, however, the market does tend to follow fairly uniform trends.
The trend starts with a massive surge in marijuana prices, often with multiple marijuana stocks rising in tandem. The rush is more often than not caused by some form of breaking news, whether it’s a big investment from an outside industry or political gains in the fight to see marijuana legalized.
What follows is a small but highly effective period of gains. This can last anywhere from a week to well over a month.
Afterward, we see a steadying out of the market, punctuated by erratic peaks and troughs but without a discernible trend line.
Then, the correction sets in as a reaction to those huge leaps in such a short period of time.
The correction can and often does last several weeks to several months, until another bit of good news spikes the marijuana stock market higher and the process repeats itself.
It doesn’t always follow the steps to the letter, but this is a common enough occurrence in the pot stock market. The end of 2017 is a perfect example.
And that brings us to the current market climate.
With marijuana legalization in Canada behind us and the last major investment being back in August, the industry is starved of news that could help propel cannabis stock prices to new heights.
For now, many are watching closely to see how the rollout of legalized marijuana will play out in Canada, but otherwise, investors are waiting patiently for the next big marijuana news to land and spur gains.
With nothing on the horizon (yet), long-term pot buyers will need to hold fast and ride out what may be a few dips in the market until the next major event comes along to break us out of the correction.
In the meantime, however, day traders will be able to make strong returns on their investments if they are able to time the peaks and troughs that accent a correction.
As is usually the case with our Marijuana News Today columns, we look to Canopy Growth Corp (NYSE:CGC) as a good measure of how the industry as a whole is doing.
And today, it is doing very well. CGC stock jumped about seven percent in early-morning trading, marking the first day of strong gains since marijuana legalization in Canada on October 17.
CGC stock’s rally today was enough to almost salvage what has otherwise been a disastrous past week, with the company marking a two-percent decline over the past five days.
Correction or no, I still am very high on Canopy Growth Corp. The company has all the tools to make it a very strong pick for years to come.
The best thing to do with CGC stock in a down marijuana market is to hold on to the shares and ride out the wave.
Canopy has so many tools that can help it rebuild swiftly in the aftermath of a correction that investors in the company ought not to worry for too long. Furthermore, I doubt CGC stock will be as badly harmed during the correction as other stocks with fewer foundational strengths, such as…
Tilray Inc (NASDAQ:TLRY) was up big to start the day, gaining about 10% in early- morning trading. However, the company fell about seven percent over the past five days, even with those gains factored in.
And unlike CGC stock, Tilray stock will be more vulnerable to the correction that is likely underway.
While both stocks have the potential for big gains in the near term in market rallies like the one we’re seeing today, as well as the possibility for growth via partnerships and investments, I tend to favor CGC stock over TLRY stock.
The main reason that I prefer Canopy is that Tilray stock is so hype-dependent that, in the absence of good news, I worry how it will be able to maintain its gains.
The company has been in the spotlight ever since it arrived on the scene as the first-ever marijuana initial public offering (IPO) on the Nasdaq.
Since then, the company has been nearly unstoppable on the pot stock market.
But aside from growth prospects, there’s not a whole lot drawing investors to Tilray. Or at least, not when compared to other industry heavy hitters.
It has fewer international operations, fewer and/or weaker supply agreements, and otherwise is not as well positioned to take advantage of the marijuana sector when compared to similarly sized companies.
That doesn’t mean TLRY stock is a bad pick necessarily, as it has time to develop in these areas. But it does mean that a big drawback could be in its future, whereas more established companies like Canopy are likely safer.
Another one of those established stocks is Aurora Cannabis Inc (NYSE:ACB).
ACB stock climbed about seven percent in early-morning trading, putting it at a 10% decline over the past five days.
This is especially brutal for ACB stock, as its switch to the New York Stock Exchange (NYSE) was overshadowed by the industry downturn.
Still, much like CGC stock, ACB stock has a lot of potential for future growth built on the backs of its strong supply agreements and global presence.
While Aurora has traditionally suffered more than CGC during corrections, I believe that in the aftermath of this pullback, we’ll see ACB stock climb faster than most.
CGC, ACB, and TLRY Stock Performances
The CGC stock (black line), ACB stock (blue line), and TLRY stock (red line) performances from the past week are seen in the chart below:
Chart courtesy of StockCharts.com
The pot stock market rally was a sight for sore eyes in the marijuana news today, but it does not mean that the drawback is totally banished.
I believe that we’ll be experiencing declines, or at least muted gains, for the next several weeks. This trend will be interrupted now and again by surges and pullbacks, but I do believe the marijuana industry has entered a correction.
The key is to not panic and, as has happened umpteen times before, ride out the pullback and focus on the gains awaiting you on the other side.