The cannabis market these past days has moved in line with the previous weeks. Cannabis stocks are moving without a clear direction and there is a lack of major news. The overall situation on the market, which is still suffering from the coronavirus, isn’t too rosy either.
There was some good news for the cannabis industry coming from the USA, where the legalization of CBD is finally gaining steam. Many industry watchers think of it as a superbrand, a revolutionary medicine, and wellness product. If cannabidiol is legalized in the US, the industry can bank on multi-billion-dollar sales, as cannabidiol is not intoxicating and very popular worldwide.
Cannabis companies are scrutinized by analysts, some of whom are skeptical. However, according to reports, cannabis sales in the USA and Canada are very robust in the second quarter, which is an encouraging sign.
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Recent developments in the cannabis market
FDA, the American supervisory authority for drugs and medicines, is closely looking at CBD oil. The FDA is mostly interested in coming up with clear guidelines, which consumers want even more than companies and the control of the market. There are numerous CBD consumers and among the biggest problems they face are wrong labeling, as well as misleading promises that cannot possibly be met. Big claims like eternal youth, cures for cancer, and much more are thrown around without any checks from the FDA. As in Germany, some US bureaucrats are purposely blocking the legalization of CBD products: regulation means normalization and therefore less room for arbitrary treatment, and so the procedure is deliberately dragging on.
There was really not much news about cannabis shares in the past week, but for more and more companies, especially smaller ones, the capital problem continues. From time to time, you can read reports about a big wave of bankruptcies caused by the pandemic. However, the cannabis sector seems to have been spared so far, suggesting that the cannabis industry might get through this time better than expected, with obvious positive implications on the stock price.
Cannabis index and performance of cannabis shares
The week brought a very slight increase for US and Canadian cannabis stocks. The initial transaction volume showed that not much has happened at first. Then investors started to buy, especially in the second half of the week, likely thanks to the above-mentioned reports around the FDA. As usual, the well-known companies are at the top of the trading volume list, with turnover even a little higher than in the weeks before.
Selected shares at a glance
Canopy Growth: Those who trade warrants here still got a nice return, but the otherwise 1 or 2 percent plus is not much. Analysts hold the bar high here in part because the deep-pocketed Constellation Brands provides for sufficient capital for Canopy. The current price of about $17 (€15) could perhaps even increase in the double digits in the run-up to the upcoming quarterly figures of Canopy Growth, if expectations are positive.
Aurora Cannabis: Prices dropped by a few percentage points, but below $12.55 (€11) investors bought again. This slight up-and-down movement will probably only change with new figures. It could be worthwhile to ride the chosen direction up to old lows or highs depending on the course.
Tilray: After Tilray’s stock slipped again below $8 (€7) and even almost down to $6.85 (€6), this week also brought no special news. Those who could take part in market moves collected quite a decent return in the short term. However, such trades made without real news are risky and on the chart everything looks rather gloomy. There are surprises in the stock market, of course, but the recent movements were probably more technical in nature than real confidence.
Aphria: At the end of the week, Aphria saw a rise to over $4.56 (€4). Some investors were certainly happy about that and Aphria continues to show strength in the chart. A drop below $3.4 (€3) has been consistently prevented so far. We can consider this mark as strong support, which could also move further up at new highs. So is it worthwhile to start riding this trend?
Deutsche Cannabis AG: Again no news and still in the range of a little over 50 cents, although we, unfortunately, can’t see the trade volume for Deutsche Cannabis AG in more detail. Insider buying or selling and, if so, how much? No information and therefore no foreseeable direction with this stock.
Outlook for the coming week
Coronavirus and quarterly reports – that’s what investors are looking for and waiting for in cannabis stocks. It is certainly wise these days to study the charts and the resistance and support levels. There are always trend breakers, but once the direction is clear, we ride the trend. At the moment it is mostly stable, but with a decent change in news, cannabis stocks could quickly change course.
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