Paramount Pictures
Mom-and-pop investors have become excited about the use of marijuana and cannabis. They have been aggressively pouring their savings into marijuana stocks with stars in their eyes about how rich they are about to become.
Unfortunately, those investors have not had the proper guidance or expertise about when and how to buy marijuana stocks. The smart money, or professional investors, has been picking their pockets.
Let’s explore with the help of three charts:
• Please click here for the annotated day chart of Canopy Growth
• Please click here for the annotated intraday chart of Canopy Growth.
• Please click here for the annotated chart of Neptune Technologies
Please note the following from the charts:
• The VUD indicator is the most sensitive measure of net supply and demand in real time. The orange on the chart means net selling. The VUD indicator shows heavy net selling.
• Canopy stock spiked as mom and pop rushed into the stock on the legalization of marijuana in Canada.
• Mom and pop buying caused the stock to technically break out.
• Many gurus noticed the technical breakout and started recommending the stock to their followers, causing even more buying.
• The smart money knew that legalization in Canada was long expected and was already discounted in the price before the latest run-up.
• The smart money took advantage of the strength and started selling.
• Neptune Technology’s stock rocketed on the news that the company will supply cannabis-extract products to Canopy Growth. There was not much information to disclose but mom and pop heavily bought the stock anyway.
• The chart of Neptune shows the smart money selling the stock.
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Money is to be made in cannabis stocks both from the long side and from the short side — on prices going up and down. Short selling is suitable only for sophisticated investors with experience. As an example, ZYX Short Sell Change Alert, a service of The Arora Report, has taken a short position in Neptune Technologies.
Similar price action has occurred in other popular cannabis stocks such as Cronos Group and Aurora Cannabis
Cannabis pharmaceutical stocks
The price action is dramatically different in cannabis-related pharmaceutical stocks such as GW Pharmaceuticals Zynerba Pharmaceuticals and Zogenix Please see “What to expect from marijuana stocks after the first big medical cannabis win.”
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article. 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.