Ted Ohashi's Marijuana Stock Market Review & Outlook
I will being this week by pointing a divergence that seems to be building between the Let’s Toke Business Marijuana Composite Index and the Momentum Index. This is shown in the price index above and momentum below The red circle on each graph points out that although the price index has been relatively flat for the past couple of weeks, momentum has been weaker. Two things are worth noting. First, when prices and momentum diverge, we follow momentum. In other words, momentum is telling us the cannabis stocks have not been as strong as prices are indicating. As I am optimistic for the cannabis stocks, this indicator runs contrary to my expectations. As a result, this divergence between prices and momentum is worth watching.
Here are the LTB Licensed Producer and Low-Priced Composite Indexes. Again we can see a price divergence with the Licensed Producers posting a decent +1.6% result while the Low-Priced stocks recorded a comparatively weak -2.2% result. At this point, I still view this a positive for the cannabis group. It seems to confirm that investors are confused and not totally committed to the group. That is yet to come and as it evolves, prices should move uniformly higher.
I monitor the Canadian and U.S. based cannabis stocks relative to each other by using the U.S. and Canadian indexes owned and managed by MJIC, Inc. Last week saw the Canadian stocks up nicely led by the larger, licensed producer group. The chart to the lower right shows the U.S. stocks were unable to keep pace resulting in a modest decline relative to the Canadian group. This did not change the overall trend and I continue to look for the U.S. operators to outperform.
Conclusion: I prefer the type of market action we are seeing now compared with the spikes up and down in prices we saw in the fall of 2017 and the summer of 2018. Price spikes don’t do anyone any good except for the occasional speculator. In the stock market it is better to the tortoise than the hare. Khiron Life (TSXV: KHRN) (OTCQB: KHRNF) had another major announcement this week as it signed a binding letter of agreement to acquire 100% of NettaGrowth International that will own at the time of closing the first licensed producer of medical cannabis with THC for commercialization in Uruguay that will open the door to the 75 million people in Southern Brazil.