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 | | | Marijuana Market Is Not Out of the Woods Yet | | Matthew Carr | Chief Trends Strategist | The Oxford Club | | | | | I was wrong.
A few weeks ago, I wrote about how there's been a pattern in the five bear markets pot stocks have seen over the last three years.
In three of those five massive sell-offs, stocks hit lows in mid to late August.
So I thought we might be out of the woods. For a little bit, it looked like we might be.
Right on cue, at the end of August through the first two weeks of September, the North American Marijuana Index rallied nearly 10%.
But then the vaping crisis gained national attention. And the selling pressure was simply too much. Stocks hit new 52-week lows... From the March 21 peak of 1,916.15 to the October 1 low of 956.39, the North American Marijuana Index lost 50.08%.
Its value was cut in half.
On top of that, those weren't just 52-week lows. Those were the lowest levels the index has traded at since November 2017.
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| Time to Legalize?
October is often seen as a scary month by investors.
That's because numerous market crashes have taken place during this month.
But for pot stock investors, the start of the fourth quarter has been dominated by another scary number.
As of October 1, the Centers for Disease Control and Prevention has reported 1,080 cases of the vaping-related lung illness.
Of those afflicted, approximately 70% are male and 80% are under the age of 35.
The number of fatalities now stands at 18 across 15 states. California, Kansas and Oregon have reported multiple deaths.
In the wake of the epidemic, advocacy groups are calling for the U.S. government to act.
And just banning e-cigarettes and vape pens isn't enough. Advocates are calling for the federal government to legalize cannabis so the industry can be regulated.
"We have the tools to protect cannabis consumers and improve public safety, and are ready to help Congress implement them without delay," National Cannabis Industry Association Executive Director Aaron Smith said.
Despite the tragedies unfolding in the U.S., cannabis companies to the north remain unfazed...
Canadians Aren't Spooked
Over the next several months, Canadian cannabis companies will be rolling out derivatives, edibles and infused products. These include THC vape pens.
But as Canopy Growth Corp. (NYSE: CGC) CEO Mark Zekulin recently told Bloomberg, the vaping crisis hitting the U.S. isn't expected to be repeated in Canada.
That's because the Canadian market is fully regulated. There are rules that companies must adhere to that cover what goes into their products.
As Zekulin stated, "Canopy didn't go out to China and source the first product we could find and ask somebody else to fill it and put our brand on it. We've been building these products for two years."
He reminded investors that Canopy's products have safety features, UL-certified batteries and heating elements, and serialization - so that if something does happen, the source of the problem can be traced and dealt with.
The High Five
Below are this week's High Five, where - each Monday - I cover the five pot stocks I believe will make major moves - up or down - in the week ahead.
1) Plus Products (OTC: PLPRF) is launching its first national advertising campaign for its 100% hemp CBD product.
This is a sleep aid product made with melatonin. The company partnered with singer John Legend and mattress company Casper.
Plus Products makes gummies only but has still been caught up in the vaping crisis sell-off. Hopefully the nation's attention will start to shift away from the company.
2) Aphria (NYSE: APHA) is the next big-name cannabis company to report earnings.
The Canadian producer is scheduled to report first quarter earnings on October 15 before the market opens.
So we have a little lead.
Expectations are for revenue to skyrocket 1,214.5% to $100.2 million. Of course, all eyes are going to be on earnings per share and how much of a loss will be reported.
3) Green Growth Brands (OTC: GGBXF) recently cut the ribbon on its 150th CBD shop.
That's a huge accomplishment considering the company opened its first Seventh Sense Botanical Therapy CBD location in February. So this has been a considerable undertaking.
The company is trying to hit 200 retail locations by the start of the holiday shopping season.
Green Growth is banking on gobs of CBD-based gifts this year. And to get consumers in the mood, it's launching its first national media campaign this month.
4) Canopy Growth Corp. (NYSE: CGC) shares set a new 52-week low of $20.52 last week. From peak to trough, Canopy shares have fallen more than 60% in 2019.
But once they bottomed out on October 1 and started to head higher, so did the rest of the pot stock universe.
We'll be watching for support around $22.58 and expect to see some resistance around $24.75.
5) PharmaCielo (OTC: PHCEF) isn't moving in lockstep with its cannabis brethren. The Colombian producer has been seemingly insulated from the vaping crisis sell-off.
Shares are down more than 55% from their 2019 highs set back in March. But because PharmaCielo has been moving counter to the broader marijuana market, that makes it worth watching this week.
As always, we like to compare the performance of our High Five with the benchmark Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF).
The past six months have been tough for pot stocks. So - to no one's surprise - the index is down 16% over the past month... Like several key stocks in the cannabis sector, the Horizons Marijuana ETF set a new 52-week low to start the fourth quarter.
But Aphria is the only company really underperforming the benchmark at the moment.
We've also seen big jumps higher recently from Green Growth Brands and Plus Products.
And we can see that PharmaCielo is outperforming the marijuana index by a wide margin over the past month. That's because while the sell-off deepened for the Horizons Marijuana ETF and the rest of the cannabis sector, PharmaCielo shot higher.
This speaks to diversifying pot stock holdings, not just outside of the U.S., but outside of North America.
I'll admit: I don't know if we're out of the woods yet.
We're witnessing a strong bounce back from those October 1 lows. But the next week will be critical to see whether that was the last great attempt at a shakeout... or if there might be one more on the horizon.
If you have a pot stock in mind that you'd like me to discuss here, click the comment button below.
Here's to high returns,
Matthew | | | | |  | | | | | |  |  | | | | Matthew Carr | October 3, 2019 The companies at the heart of the munchies trend are not only in the green, they're outpacing the gains of the broader markets. Read More | | | | |  | | | | David Fessler | October 2, 2019 The electric vehicle revolution cannot be stopped... and I'm not the only one who thinks so. Read More | | | | |  | | | | Matthew Carr | October 1, 2019 Investors looking for the safest bets need to start focusing on profits and operating income instead of revenue. Read More | | | | | | | | | | | Don't Buy Bitcoin Until You See This
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