#MarijuanaStocks – gains are high in the weed patch

The vast majority of stocks move with the market. And some stocks move more than others, both up and down.

Take the marijuana stocks as the prime example.

At what may have been the end of the bull market last August, this newcomer stock sector was leading the market (a telling sign the bull was getting too high) and with the fall in the Fall, its stocks all went down together.

Even the sector’s leaders took a drubbing CGC, which Constellation Brands had just put a ton of investment money into, dropped from a high of $59 to a recent low of $24. TLRY, an extremely hot IPO screamed crazily from its IPO price close of $22 to a high of $300 in two months (its founder may have been the fourth richest man in the world for one day…on weed) and then plunged to an almost still respectable low of $70.

What fundamentally changed at those companies in the three months the market sold off and took them down? No much, if anything at all.

So coming into the market bottom, that was an obvious vibrant sector that needed to be watched for a big bounce.

And, indeed, the marijuana stocks have not disappointed any swing traders looking to make bear-market rally plays (see the chart panel below). Since the December 26th blog buy signal here, CGC has rocketed 52%, CRON 27%, GWPH 31%, ACB 37%, and TLRY had gained 37% until it was knocked down to a “mere” 13% gain in today’s action.

That hit on TLRY today is why I bring all this up now.

There is speculation TLRY’s drop was caused by fear that an expiration of the lock-up period on IPO insiders would bring on selling, a self-fulfilling prophesy if ever there was one but then most moves in the market usually are. With the exception of GWPH, the granddaddy stock in the sector, the rest of the stocks took hits in one way or another today along with TLRY.

It was on some news, profit-taking, whatever, but it was a hit in the leading sector on a market up day. That is an alert.

In the blog post below the suggestion was and still is to play defense, defense, defense during this rapid rise in the market because of the likelihood this is a bear-market bounce that can go ragged at any moment, and in some sectors die on a dime.

Bull markets end and bear markets begin on one down day. And sector rallies do the same.

Today may or may not be the end-of-the-swing day in the weed patch, but it turns out to be, as we used to say in the 60s and 70s and the bear can growl now: “Don’t bogart that joint, my friend.”

(click on the chart panel for a larger view)

Five sessions in the marijuana stocks

Going into the market selloff last month, marijuana stocks were the leading sector in the market.

The stocks were flying on Constellation Brands certification of the sector’s profit potential with a $4-billion investment in Canopy Growth Corporation (CGC), then came Canada’s blanket legalization of the weed, Michigan in this election becoming the 10th state to legalize recreational uses in the U.S., following pot pioneers Washington and Colorado and others.

And now Jeff Sessions, the leading federal marijuana-legalization opponent, has been forced to resign as U.S. Attorney General. While Trump forcing Sessions out no doubt has more to do with Robert Mueller’s Russia investigation, it does have the side effect of removing another obstacle in the road to a possible national legalization.

The leading stocks in the marijuana sector surged today on the Sessions news but they were already on the run with the market bounce.

Long-term breadth (measured by the McClellan Summation Index) turned up after a 40-day decline on October 31st, giving a clear market-timing signal to buy the market on the open on November 1st, five trading days ago.

CGC is up 23.7%, TLRY 41.8%, CRON 29.2% and the ETF for the sector, MJ is up 16.9% (see the charts below, the white flags on the lower right tell the gains far per $100K invested).

In addition GWPH, a stable medical marijuana stock that has been around for a long time in the US, is up 8.9%.

All in five trading days. This sector is a perfect example of the splendid simplicity of the long-term breadth signal. Coming into the market selloff as a leading sector, it was highly likely (almost a certainty) that as the market’s drop stopped, the sector’s stocks would bounce fast and high…so to speak.

(click on the chart for a larger view)

UPDATING getting high in the weed stock patch 9/6

UPDATE 9/6: as suggested in this post yesterday the marijuana stocks were looking vulnerable to a correction. Today they took the projected tumble: TLRY down 15.4%, CGC down 4.5%, CRON down 7.55, the sector ETF, MJ, down 2.1%, and INSY down 7.6%. See updated chart below. There are still substantial profits on the table. Might think about lightening up, if not exiting completely (it’s been a great fast run). There is likely more downside to come since the market, even if it bounces tomorrow, is now in a down thrust and these stocks which have gone straight up and can also go straight down).

This is an update to this post two weeks ago:

A Serious Swing Through The Weed Patch

Marijuana stocks have gone crazy in the last 10 trading days, putting on the kind of gains that last marked the dot-com bubble in 1999 and 2000, which of course lead to the end of the nineties bull market.

TLRY up 189%, CGC up 52%, CRON up 87%, the sector ETF, MJ, up nearly 28%.

See the chart panel below. Gains per $100k traded are in the white flags on the lower right of each chart.

If I owned these, I would exit on any down bar to preserve profits. Note IIPR and INSY while still profitable have followed through currently on down candles. CGC turned in a red candle today which makes it worth watching on the open tomorrow. In fact, CRON and MJ also look vulnerable.

Congratulations to anyone hold these, but, me thinks, one should not fall in love with them.

(click on the updated chart for a larger view)

#SwingTrading – a serious swing through the weed patch

Marijuana stocks are the ruling weeds in the market garden on this upswing.


SWING TRADING TRIGGER – AUGUST 16TH

That was the technical trigger for the open three days ago.

The fundamental trigger came on the news Constellation Brands (STZ), U.S. distributor of Corona and Modelo beers, was investing $4 billion for 38% of CGC. All of a sudden, the Wall Street mob discovered it might be acceptable to pour money on the weed patch, particularly those springing up in Canadian gardens where marijuana has recently been made legal throughout the country.

As a result, of those traded in the U.S., CGC is up 26; a new IPO, TLRY, up33%; CRON, 27%. Even the most legitimate of the medical marijuana companies, the stalwart GWPH is up 3.6%. See the white flags on the lower right of each chart below which correspond to the cash and percent gained for each $100K invested.

Of particular note is MJ, up 10.7 percent, the sector ETF for the weed patch. MJ tracks the Prime Alternative Harvest Index, generally by holding many of these stocks and others traded on the Toronto Exchange.

(click on the chart panel for a larger view)

$GWPH – still the best marijuana stock

After four more states ended marijuana prohibition in Tuesday’s election with California (the biggie), Massachusetts, Maine and Nevada legalizing its use, there is increased interest in the stocks in the sector.

Many are small and speculative almost beyond belief. No doubt several will someday be big winners but the for now leader in the sector is GWPH.

Here is a description of the company (borrowing from Yahoo finance, https://finance.yahoo.com/quote/GWPH/profile?p=GWPH):

GW Pharmaceuticals plc, a biopharmaceutical company, together with its subsidiaries, engages in discovering, developing, and commercializing cannabinoid prescription medicines. It operates through three segments: Commercial, Sativex Research and Development, and Pipeline Research and Development. The company primarily offers Sativex, an oromucosal spray for the treatment of spasticity due to multiple sclerosis. It also focuses on the Phase III clinical development program of Sativex for use in the treatment of cancer pain; and Phase 2 trials in other indications, such as neuropathic pain. In addition, the company’s product pipeline includes Epidiolex, a treatment for Dravet syndrome and Lennox-Gastaut syndrome, as well as other product candidates in Phase 1 and 2 clinical development for the treatment of glioma, adult epilepsy, type-2 diabetes, and schizophrenia. It operates in the United Kingdom, Europe, the United States, Canada, and Asia. GW Pharmaceuticals plc was founded in 1998 and is based in Cambridge, the United Kingdom.

And technically speaking, the stock is strong.  Swing traders may want to just follow the blue 5-day exponential average to move in and out to reduce risk.

(right click on the chart for a larger view)

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