By Ted Ohashi
- Marijuana stocks nearing a rally point soon……………p1
- Our thanks to the often overlooked pioneers of the Canadian cannabis industry……………p2
- Canopy and Emblem preparing for legalization ……………p3
- The CSE a cannabis exchange?……………p3
- ACB reports third quarter……………p5
- First Access Medical latest Licensed Producer……………p5
- See our recent articles on Seeking Alpha
New! NXTTF – It’s Time to Fill Your Boots May 22, 2017
Under The Cannabis Act the Rich Get Richer May 4, 2017
Before You Can Sell LXRP High, You Must First Buy it Low March 17, 2017
Why Organigram Merits a ‘Must Buy” Rating March 8, 2017
How Attorney General Sessions can Derail the Marijuana Gravy Train February 27, 2017
High Growth Cannabis Company Trading Less Than One Times Sales February 20, 2017
Reassessing the Ever Changing Outlook for Canadian Cannabis Stocks January 30, 2017
Update: My Confidence in Buying Organigram is Affirmed January 20, 2017
Marijuana Stock Market Review & Outlook
LTB MJ INDEX: 1wk -1.2% 1 mo -9.7% 3 mo -16.0% 6 mo -9.1% 1 yr +35.2%
It was another down week last week with a couple of signs of hope. The Let’s Toke Business Marijuana Composite Index dropped 1.3% and momentum confirmed the loss although the loss of momentum was eased slightly.
The better news was the Licensed Producer Index moved 1.4% higher while the Low-Priced Stock Index gained 3.7%. In both cases, momentum was flat with as many stocks falling as rising.
This chart will be familiar to our regular readers. It shows that in the three and one-half years that we have been producing the Let’s Toke Business Composite Index, there have been 32 declines in the Index lasting from one week to seven weeks.
It also shows that over this time period there have only been three instances in which corrections have lasted longer than five weeks. In other words, in 93% of cases, corrections have ended at or before this point: one lasted six weeks and
two lasted seven weeks. As they say in sports, “Records are made to be broken.” In other words there is no reason to assume a correction marijuana stocks cannot last longer than seven weeks. It is simply an indication that the current correction may be getting long in the tooth.
Our sense of the marijuana stocks is that we are probably close to a low point based on the indexes. Whatever happens, we expect the marijuana stocks will gradually begin the act like the broader markets. If you’ll forgive an adjusted metaphor, “The low hanging marijuana buds have been picked.”
This means when the upturn begins, it will not make immediate headlines. It will turn quietly on lower volume in an unspectacular fashion. As this happens, look to the Licensed Producer group to play a leading role. Looking ahead, we think the Liberal government passing the Cannabis Act prior to the summer recess that is due to begin on June 24, 2017 could be a positive. On the negative side, we believe a fiasco surrounding the MedReleaf underwriting would cause investors to adopt a wait- and-see attitude. The components of such a flop would include: cancelling the offering, insiders being forced to cancel their plans to sell or a completed financing that results in a publicly traded MedReleaf stock heading sharply lower, say, down 20% or more from the offering price in the early trading sessions.
The advice remains little changed. Although the past five weeks have been a new experience for less stock market seasoned marijuana investors, it feels very normal from a typical market perspective. Corrections of five weeks or longer are common.