Will Cannabis Stocks Make a Comeback?

by Options Sensei

Cannabis stocks were all the rage in 2016-2017 as legalization and medical applications started to gain approval. New companies sprouted up in the green fields, the high growth industry with many coming public to massive valuations and enjoying big run-ups in share prices. The action was very reminiscent of the dot.com daze as investors/speculators seemed simultaneously aware that a bubble was building while also believing there would ultimately be a few massive winners giving justification to the gold rush mentality.

Indeed, the stocks suffered a massive collapse with many of the smaller, and less above board, companies going out of business. But even major players companies such as “Canopy Growth (CGC)” in which beer and liquor giant “Constellation Brands (STZ)” took a $3 billion 30% stake, saw its shares decline by over 85% from the 2018 highs to 2020 lows as legalization legislation stalled and supply far outstripped demand.

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But, for the first time in more than two years, there appears to be signs that the industry is finding its footing and the stocks have found a bottom. You can see the popular cannabis ETF, “ETFMG Alternative Harvest (MJ – Get Rating)” has enjoyed a nice 30% bounce from the lows.

Now, the question is whether this is sustainable? Because cannabis is still a speculative sector facing numerous challenges using options to gain exposure to the upside potential makes sense. There are a number of reasons I think this cannabis sector can move higher in the coming months.

 

First, it appears the… Continue reading at StockNews.com

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