Unfortunately for lovers of Cannabis stocks, they are being hit with the proverbial "double-whammy." As laid out in my previous blog, "Making a case for cannabis stocks", MJ stocks were sent too high, too fast, due to a number of events; anticipated legalization, exchange traded funds needing to invest cash, the bellwether stock Canopy leading the charge, and in November 2017 a slew of MJ equities were undiscovered, undervalued, with many laboring under one dollar per share.
So after Canopy hit $40.00 per share, MJ stocks stalled, then ultimately corrected. A much needed correction, that is, to help reset most stock charts. What took place a day later was the beginning of a much needed correction in the DOW and NASDAQ markets. Coincidence? Perhaps.
For the cannabis marketplace, the timing for the correction in U.S. equities was most unfortunate. The selloff in cannabis stocks on Friday, February 2nd was overdone. A few equities were close to a full retracement back to their "pre-weed rally" levels. The exchange traded fund MJX was looking at the same level $28.75, after hitting $40.00, as where it started as a newly re-allocated fund. MJ stocks were poised for a rebound on Monday, February 5th. When trading markets opened, indeed MJ stocks rallied.
But now it was the DOW's turn to throw water on the "bounce parade". As many cannabis stocks were green midday, the DOW was in the process of dropping 1,200 points. Understandably, this dragged the rebounding weed stocks lower, effectively cutting the rally off at it's knees. At the end of the day the DOW ended at 24,345 off 1,175 and very few MJ stocks were left finishing green.
It was the world market's turn on Tuesday morning. The NIKKEI was off by 1,500 points, or over 5%, before reversing to a current 1,071 points lower. DOW futures call for a lower opening as well, but I see a recovery midday today, Tuesday. I predict a 300 point lower opening to approximately 24,000. If you are not stopped out, or margin called out, and you are still alive, financially speaking, this will be a fantastic opportunity to buy cannabis equities. All will be priced attractively. I assume by now you have done your research and you have focused in on your favorite MJ stocks.
So what is in the cards for the near term?
At this point we have to go with the story-line that this is a healthy correction in the DOW's bull market. This will change to a bear market when we see interest rates over 5 percent again. There are many reasons to be optimistic about the future of companies in the marijuana space. Growers, distributors and merchandisers alike.
* Pending legalization in Canada and legalization in California. 75 million population strong, excluding minors.
* Worldwide momentum towards marijuana adoption for medical and recreational needs.
* Pending investments or take-overs by big tobacco, alcohol and pharmaceutical companies ( save for Constellation Brands ).
With many MJ equities looking to touch their pre-rally prices midday today, Tuesday, you may never get another opportunity like this to jump onto your favorite MJ companies, for what is sure to turn out as a fun ride.
Disclosure: I am/we are long MJX.
Additional disclosure: These are my investing thoughts only and should not be solely utilized to make an investment decision.