Could pot stocks be the next big coronavirus sympathy sector?
So many people are in varying levels of self-isolation, lockdown, and even quarantine around the world. And as a result, there are a ton of ‘stuck at home’ stocks on the rise. At-home fitness, food delivery, remote-working solutions … Stocks in all of these sectors have spiked.
Could a pot stock rally be next?
It kinda makes sense. People are stuck at home. They’re bored and anxious. For plenty of people, it’s prime time for stocking up and toking up. Add to that the fact that in many areas pot shops are still considered ‘essential’ businesses and remain open … And you’ve got a recipe for potential stock spikes.
Are pot stocks worth a spot on your watchlist right now? Let’s look at the pot stock sector, key considerations, and some recent cannabis stock runners.
Want a head start? Check out this recent video:
Table of Contents
- 1 Coronavirus: The Biggest Catalyst in Years
- 2 Coronavirus as an Indirect Catalyst
- 3 Pot Stocks as a Coronavirus Sympathy Play
- 4 Marijuana Stocks on the Move
- 5 Scan for Pot Stocks With StocksToTrade
- 6 Bottom Line: Is the Market Going to Pot?
- 7 One Platform. One System. Every Tool
To say that the coronavirus has had an effect on the stock market would be a massive understatement. It’s totally taken over.
Nearly all stock market activity in recent weeks — both good and bad — has been related to the virus, either directly or indirectly. Let’s break down this huge catalyst…
The coronavirus has been a direct catalyst in making a lot of stocks drop. The recent market crashes and descent into bear-market territory are largely viewed as a reaction to the global uncertainty caused by the virus.
Shuttering businesses, staggering unemployment rates, shelter-in-place orders … Our lives are upended. It’s unfortunate but not surprising that the markets plunged.
The U.S. stimulus package helped a bit, with some large-cap companies making impressive rebounds at least in the short term.
But that’s not the same as saying the market is back to ‘normal.’ Who even knows what that means these days? According to many sources, we’ve still got a long way to go.
But as always — even in a downtrending market — some stocks are soaring.
Right now, it’s mainly virus-related plays: companies involved in potential cures or vaccines, mask manufacturers … Pretty obvious stuff.
There have been some insane spikes with these stocks. Many are short-lived. They might repeat or might fade into oblivion … I go over them daily in StocksToTrade Pro webinars.
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Something a lot of traders don’t realize is that coronavirus is creating spikes in stocks that might seem unrelated to the sector — at least on the surface.
But as I love saying … they just make sense.
For instance, stocks related to at-home convenience are experiencing incredible spikes.
One I’ve talked about a lot is Blue Apron Holdings, Inc (NYSE: APRN), the meal delivery service that spiked from the $2s to the $28s in the midst of the coronavirus. And may continue to offer trading opportunities.
Wanna learn about coronavirus sectors and sympathy plays? Don’t miss this post.
So how will pot stocks do in this market? Let’s see if this could be one of the hottest emerging coronavirus sympathy plays.
A lot of traders want pot stocks to make a comeback.
In 2018 and the first half of 2019, pot stocks were on FIRE. But toward the end of 2019, the sector seemingly went belly-up. It hit new lows thanks to weak earnings and ever-mounting cash concerns with several of the big pot companies.
But right now, with so many businesses closing, it could be a time for weed stocks to shine again.
There are signs that weed demand has increased … But does that mean it’s a good time to buy pot stocks?
Ponder This Before Buying Pot Stocks
I’ll be straight-up with you: I’m not the biggest fan of pot stocks right now.
Overall, the industry still isn’t showing a lot of growth potential. Sales are generally disappointing. The supply is uneven — it seems like a lot of companies either over- or underproduce. There’s still a lot of regulatory gray area.
Add to that the fact that we’re about to go into earnings season. It remains to be seen whether the current demand for pot is actually causing major waves in company earnings.
Interested in learning more about earnings winner setups? Check out this post.
My personal stance is that there’s so much happening with direct coronavirus plays and plays like Blue Apron that I don’t want to waste my time on a sector that has so much uncertainty.
That said, there have been some impressive pot stock spikers. So if it’s your bag, they could be worth watching.
My advice? If you choose to focus on pot stocks, focus on those with a laser eye rather than spreading yourself too thin. Don’t try to stay on top of direct virus plays AND pot stocks. You can only do so much.
Marijuana Stocks on the Move
What’s making pot stocks move?
It could be that people are just finding it harder and harder to maintain motivation. Or it could be that medical marijuana customers are buying up now so that they won’t run out later — you know, the toilet-paper effect.
Does this mean that pot stocks are on the brink of a massive turnaround? Or is this a dead cat bounce before the industry buckles and breaks? Time will tell. In the meantime, let’s talk about what’s moving…
Innovative Industrial Properties, Inc. (NYSE: IIPR)
This is a higher-priced stock, but sometimes you’ve gotta look at the bigger guys even if you’re not considering trading them. They can give you an idea of the trajectory of smaller operations.
Since its start in 2016, this stock has had some serious ups and downs. In the early days, it stayed fairly sideways, trading in the $10s. But then in 2018, it started to experience aggressive growth, steadily going up until it peaked at $136 in the summer of 2019.
Like many other pot stocks, sales and the stock price slumped in the latter part of 2019, with shares going steadily down.
By early 2020, shares were in the $70s. Then in late February, shares jumped to over $100 again. In the past two months, the shares have been going up and down … So there could be potential opportunities. And not just with this stock but with this sector.
Check out the chart:
MedMen Enterprises (OTCQX: MMNFF)
Here’s an example of a lower-priced stock that recently had a spike during the coronavirus crash. Like pretty much every other pot stock, it started to fade toward the end of 2019, going from highs in the $7s all the way to literal pennies per share.
But recently, without much news, the stock spiked from 9 cents to nearly 40 cents in about a week. That’s pretty awesome.
But beware: that spike was also VERY short-lived. As you can see from the chart below, the stock’s already back down to the $0.10s:
Tilray (NASDAQ: TLRY)
Same sad pot stock story here. Awesome highs in the middle of 2019, then losing ever since.
In January 2020, it was close to $23, but by March 16, it dipped as low as the $2s.
But then, there was a bullish spike on March 27. As the demand for cannabis was more widely discussed, the stock went all the way over $10. It’s faded considerably since, but it could be worth watching for future potential spikes.
Take a look at the chart:
Scan for Pot Stocks With StocksToTrade
So how, pray tell, can you find these fast-moving gainers?
Whether you’re looking for hot pot stocks, coronavirus plays, or other sympathy sectors, you’ve got to filter down the many stocks out there to find the ones that fit the setups you’re looking for.
StocksToTrade is the perfect go-to resource for scanning, watchlists, and stock research.
The StocksToTrade platform is unique in that it was created by traders for traders. That means it’s got all the goodies traders want, all in one place. Every scan and feature was designed to help traders find the most promising opportunities.
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Bottom Line: Is the Market Going to Pot?
Pot stocks have experienced huge spikes in the past. Given the apparent increase in demand for cannabis in the face of the coronavirus, it’s not a stretch to think that some of the past runners could pop in price again.
But it’s important to remember that this is an unsteady sector. We’re also experiencing an unusually volatile market. In simple terms: it’s riskier to trade than usual in these uncertain times. And pot stocks are riskier than other sectors at the moment.
With that in mind, approach this sector with extreme caution. Before you start trading cannabis stocks, be sure to do plenty of research, have a solid trading plan, and stick to your stops. Discipline is key.
Have you been trading pot stocks during the coronavirus pandemic? Share your thoughts and experiences … Leave a comment!