Marijuana Stock Market Review & Outlook

The Let’s Toke Business Composite Index posted a gain of 1.0% last week. Doesn’t sound like anything special but there was more to it. The week started normally as the strong surge in cannabis stock prices continued on Monday and Tuesday. But the market struggled on Wednesday before dropping sharply on Thursday. Many investors were gnashing their teeth as markets opened on Friday and breathed a sigh of relief when the cannabis stocks posted a rebound on Friday. There is still some skepticism among investors even though legalization in Canada is now less than a month away.

It is important at this fragile time in the cannabis stock cycle that the LTB Marijuana Stock Momentum Index acts properly. As the chart shows the small price gain on the week was matched by positive momentum. This is positive. For example, if the cannabis stock market returns to the highs reached in December 2017 and January 2018, it will be important to see momentum follow suit week by week. If it does, that will pave the way for prices to move on to new highs and keep the uptrend intact. At this stage, momentum is more important than usual.

The LTB Licensed Producer Composite Index continued to forge ahead last week posting a gain of 0.8%. Although this was a bit of underperformance relative to the Composite Index, as we pointed out last week, this group has been leading the way and is well advanced compared with the Composite and Low-Priced group. But again, the next couple of weeks is important for this group as it approaches the last level of resistance before it begins an assault on its previous high.

The Canadian Cannabis Composite Index, published by Davis and Associates Capital Corp. and published daily allows us to show in numbers what we described above. On Monday, the 3Ci posted a gain of 4.6% followed by a rise of 2.5% on Tuesday. Wednesday there was an initial sign of investor fatigue as the index was only able to advance 0.2%, followed by a freefall loss of 10.6% on Thursday. A gain of 3.2% on Friday stopped the bleeding. Overall, the 3Ci was down 1.0% on the week.

The LTB Low-Priced Composite Index continued to slip posting a loss of 3.3% last week. Should the index fall below the 155 level in the days and weeks ahead, the downtrend will be continued with 148 as the next important level. Readers have asked when I expect this index to begin to rally. Before we start trying to anticipate a turn, the group must first stop its decline. If the index falls below 155, the turnaround will be delayed for a least a month or two. But should a reversal occur in the immediate future, that could be the start of the upturn. So again the next couple of weeks is important.

Conclusion: It’s not surprising that the market is setting itself up for some important events between now and October 17, 2018 (legalization day). Somehow the net effect of all investor’s buying and selling creates these critical points. So again we must interpret what is going on day by day moving forward. I think it will be positive and excitement surrounding legalization should start building from here on out.