Back in November of last year, I noted that I had a non-investment savvy friend ask me about Bitcoin. I told him that it was massively overbought by about 300% – and ready to crash. In fact, I was so convinced of this argument that I posted a blog predicting that very event- and here it is: Bitcoin is more than a “Bit” overbought.
Guess I was right… as I predicted on this blog, the bitcoin index has fallen from just under 20,000 (when I made that call), to just under 6000 at the time of writing. I was wrong in my prediction – in that bitcoin didnt just fall 300%. If fell about 350%. Chastise me for being too optimistic (grin). I like to remind my pal that I saved him significant skin on my cautious stance when answering his bitcoin buying question. Truthfully, he had earned that free advice through some bike racing teamwork that helped me win an important Florida State Fondo championship race back in 2017. So we’re square.
My buddy (lets call him “Wrong way Feldman – aka Gilligan’s Island – per this clip) has been asking me about marijuana stocks lately. Given my buddies track record -we might want to avoid this sector, recalling his mistimed enthusiasm for bitcoin in the past. But this time, the answer to his question is not as cut and dry as it was with bitcoin. So grab some chips to stave off the munchies while I explain why well-selected marijuana stocks are not in the same boat as bitcoin was.
Canadian pot stocks (saving me the time to spell out “marijuana” every time) are a mixed bag. While bitcoin was unbelievably overbought and obviously in an Elliott wave 5 cyclical peak – I can’t really paint the entirety of pot stocks with the same brush.
Three of the larger pot stocks listed in Canada are Aurora, Canopy Growth, and Aphria. These stocks make up about a third of the new Horizons Marijuana index ETF (HMMJ-T). Of the three names, only Canopy growth is in an uptrend. Its pausing within the trend right now, which may represent a decent entry point.
The other two are basing / slowly rising with a significant overhead resistance point ahead- no bullish signs at this time. Further, the ETF, which contains 37 direct or related stocks in the sector is following that same pattern of Aurora and Aphria. That is, the ETF is also (basing, rising slightly and about to hit a major resistance point. This should tell us that the majority of these stocks are unattractive, but there are some gems within the bunch if you look closely enough.
My advice to my pal was: If you want to buy pot stock, consider Canopy Growth. Be mindful of the risk, so don’t throw too much into the trade. It’s nowhere near being a sure thing just yet. I’d avoid most of the other stocks in the sector for now. The future might be good for the sector, but its early in the game.
My pal bought the stock, with a cautious amount of capital. I’ll keep my fingers crossed for him.
Thanks for this Keith. I owned some Canopy back when it was at $6.00 but got out because I thought I had missed the boat. (grrr) I guess it’s the old adage about not being able to take the heat. The trouble is that most of us know someone who bet and won big-time on this. It rubs.
My question is about the market in general. Do you still see this as a 2011-type year?
Sally–re the 2011 remblence. You took the words right out of my mouth (Meatloaf!). I blogged on that very thought a while ago–cant recall the date or title of the blog–but yes, basically I note that the setup is similar to 2011. Good observation–try searching the blog and you will find it somewhere –written about 2-3 months ago