For this Marijuana Stock Overview, I will only be reviewing large cap marijuana stocks as they will determine the viability of all smaller plays in the sector.
CGC – Nothing has changed here in terms of relative positioning within the sector. By that I mean, CGC is still the strongest and most “blue-chip” of the marijuana stocks. However, that does not mean that it is impervious to large drops. I have said many times from $50, down to $40, down to $30, that though $30 was always a likely spot price would seek out, it by no means meant that support there would be sufficient. As we’ve seen over the last few weeks, although the 50 week MA ($30) had yet to be broken with any force (until today), the bounces off this level had become smaller and smaller. If the general market experiences any pressure in the coming weeks, this could quickly drop from $30, to $25, to $20.
The next major long term support on weekly charts is close to $20, with a true wash-out taking it down to $10 (formerly 2016-2017 resistance). While weekly closes over the 50ma continue, the chance of a reversal higher still has to be respected, but in a pot stock market that is becoming ever connected to the general market, the volatility in DIA SPY QQQ indices is not going to make it easy on CGC. Until CGC is closing over a flat/rising 5ma weekly, the short term bias here must stay bearish. Thus, the short term bias for the sector must also remain bearish.
ACB – There is not a whole lot to add here. The same analysis for CGC applies to ACB. It is one of the leading cannabis stocks, though technically it is weaker than CGC and CRON. The hope for longs here is continues buyout rumors, or an actual buyout. With a weak SPY and a weak CGC, ACB on its own san news has very little working in its favor. When CGC is ready to move up, ACB will be ready to move up.
CRON – As of this writing, CRON is in the most bullish setup out of the “bluechip” names. This is due in large part to rumors this week that Altria was looking to buyout Cronos. Cronos then came out and confirmed that there had been buyout discussions with Altria. If a buyout goes through with a large premium, CRON could see a huge surge. However, if no deal occurs within a reasonable time, the market will slowly discount the news and fade the price. All things considered, having a potential catalyst like a buyout in the near term likely positions this name to outperform the other two major players.
CRON is currently over all of its relevant SMA resistance on the daily and weekly chart (one of the only major names in the entire market to have that strong of a technical picture). If CGC weakness, SPY volatility, and the merger possibility were all ignored, this would look like a legitimate buy on both daily and weekly charts. However, if this fades quickly and returns to similar technical positioning to CGC (under many weekly MAs) it would lose any appeal it has now. On balance, I would still be weary of buying this until it fades back into big weekly support, but if looking to play one of the Big 3, this would be the one.
APHA – This one is real simple, avoid it. If you’re looking for investment-style pot stock exposure, pick one of the other leaders. The short report here, though certainly biased and certainly put out with the intent to profit, raised way too many red flags to consider this a viable blue chip any longer. Regardless of what the Canadian assets (presumably, legitimate) are worth, the credibility and honesty of management is now ruined and most astute investors will no longer consider this. The pictures produced of the Jamaican assets are quite damning, and the intermingling of Andy D. with his various entities is suspicious, unethical, and possibly criminal. If this goes up, most of the other leaders reviewed here will outperform it. Though this formerly made up part of the Big 4, it is no longer in the CGC/ACB/CRON tier.
TLRY – If $100 support breaks and is unable to be reclaimed quickly, you must make sure not to be holding this. That’s really the only note. It has drifted above and below the key confluence of weekly supports in the $105-$115 range for a month or two, but if CGC breaks under $30 and/or $SPY breaks Feb/Oct lows, this could unravel at a rapid clip. The upside potential here is real, as the tiny float and large volume interest often see it outperform the other names during mania runs, but those same factors will crush it if CGC/SPY break their long term uptrends.
PLSI – The new kid on the block. Phoenix Life is creating a platform for a global rollout of doctor prescribed medical cannabis products as well as new drugs specifically designed to target and treat diseases such as diabetes and cervical cancer. The CEO of Phoenix Life is Martin Tindall – watch a short video background interview with the CEO and Founder. The company has been putting out PRs regularly since the merger became official in September. These PRs have included the extinguishment of all previously convertible notes, the hiring of a world renowned botanist, and the approval for importation of their products for trials for the treatment of diabetes in the island nation of Vanuatu. To get a general idea of the companies strategy and plan – watch the investor presentation. The end goal here is to replicate what is done in Vanuatu worldwide. Vanuatu was selected because its climate allows for year round growing in natural sunlight (no greenhouse costs) in addition to the significantly lower costs of labor. These advantages have PLSI stating that they intend to sell products with close to a 10 X margin (much, much higher than current leaders).
Technically, the stock has shown great support in $20 range since the merger became official, with spikes as high as $48. Due to the incredibly low float (330k), this trades only modest volume and can at time produce large spreads. However, whenever key announcements have come out over the last couple months, this has consistently spiked on substantial increases in volume. Given the sturdiness it has shown in this range (when almost all pot stocks have sold off) there is a strong technical argument for PLSI. This stock is still flying way under the mainstream radar, but if the company continues to do what it has been doing, I would expect volume and liquidity to both improve over time.