President Trump’s former attorney general, Jeff Sessions, was staunchly against marijuana. His forced resignation on Wednesday is good news for marijuana investors in the long run.
And good news for marijuana keeps piling up. Please see “Marijuana’s biggest win is still ahead — but investors may lose money before then.”
So should investors buy marijuana stocks with both hands today? Not so fast. Investing in marijuana is not easy. Those with less experience think all they have to do is buy a few marijuana stocks, and they will make millions. That could not be further from the truth. Please see 11 pointers given in “How to potentially become a marijuana millionaire, albeit carefully.”
Sessions’ temporary replacement is Matthew Whitaker. How does he feel about marijuana? How long will his tenure be? Will he have a contentious relationship with Congress over Mueller’s probe of Trump? He seems to be sympathetic to patients needing marijuana, but he also seems to be pro-law enforcement.
With all this in mind, is good news about marijuana at its peak for the short term? And is peak good news good or bad for marijuana stocks? Let’s examine with a chart.
Please click here for chart of money flows in 15 marijuana stocks. Please note the following:
• In investing and trading, you are competing with the smartest brains and super computers of Wall Street. If you are using free and widely available information that is available to everyone on the internet, you have no edge. Smart money knows the free information and gets ahead of it, and in the process many investors get hurt.
• Segmented money flows give you an edge.
• As the chart shows, momo crowd money flows are extremely positive in Tilray TLRY, -15.07% and Aurora Cannabis ACB, -6.62%
• Smart money flows are neutral in Cronos Group CRON, -9.07% but momo crowd money flows are very positive.
• Smart money flows are extremely negative in Tilray and mildly negative in Aurora Cannabis.
• Momo crowd money flows are positive in Aphria AHPA, -3.06% Canopy Growth CGC, -7.97% Liberty Health LHSIF, -6.07% and MedMen MMNFF, -6.31%
• As the chart shows, smart money flows are neutral in New Age Beverages NBEV, -8.07% and The Green Organic Dutchman Holding TGODF, -7.20%
• Smart money flows are negative in marijuana ETF M, +1.61% GW Pharmaceuticals GWPH, -1.66% Constellation Brands STZ, -0.97% and Scotts Miracle-Gro SMG, +3.22%
• Smart money flows are neutral on Craft Brew Alliance BREW, -9.22% and mildly positive on Corbus Pharmaceuticals Holdings CRBP, -9.78%
• Canopy Growth is in The Arora Report model portfolio, which contains stocks such as Apple AAPL, -0.34% FB, -2.43% and Walmart WMT, +0.55%
• One advantage of marijuana stocks is that they do not often highly correlate to stock market benchmarks such as the Dow Jones Industrial Average DJIA, +0.04% or S&P500 SPX, -0.25%
Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.
Peak good news
The probability is very high that the marijuana space is near peak good news. Unless someone like Trump or Nancy Pelosi makes a pro-marijuana comment or Whitaker gives a pro-marijuana interview, there may not be much good news in the near term.
If you have been following money flows for a period of time, you may have noticed that smart money flows become positive way before the peak good news and become neutral to negative at peak good news. Often when smart money flows are positive, momo crowd money flows are negative. Around the peak good news, momo crowd money flows become very positive.
Now, think about it. Around peak good news, almost everybody who is going to buy marijuana stocks for the short term has already bought them. There is no buying power left to drive the stocks higher. Short-sellers jump in and drive the stocks lower. If you have been watching the charts, you would have noticed that the cycle repeats itself.
To learn to buy and sell correctly, please click here to see a chart of The Arora Report signals on the marijuana stock Canopy Growth. The message is to be careful if buying now.
Please also read:
How to survive marijuana stocks’ rollercoaster ride
If you buy only one marijuana stock, this should be it
Seven reasons Big Tobacco is likely to make a move on the marijuana industry
Marijuana beverages are the new thing, but investors should only take sips
Tilray is the poster boy of short-squeeze stock candidates — here’s how to find others
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.