Canadian cannabis stocks have been pummelled over the past year, but now they’re showing signs of life.
Could cannabis stocks be ready to rebound? It might seem like an odd question, given that all major Canadian licensed producers saw their share price fall for 12 straight months through February.
Yet all of them also showed a significant upswing in the latter part of March after plunging to their 52-week lows. And most continued showing momentum by April 6. Although some might snicker and ask if the recent jump is a typical bear-market “dead-cat bounce”, there are reasons for some to believe in cannabis stocks.
That’s notwithstanding the volatility that has dogged stock markets ever since the World Health Organization described the COVID-19 outbreak as a pandemic last month.
Let’s start with the fundamental in the cannabis sector. First off, people may be more likely to consume more weed when they’re stuck at home playing Call of Duty, watching HBO, and listening to tunes rather than working.
Secondly, there’s been an onslaught of edibles, topicals, and extracts coming on the Canadian market since they were legalized late last year.
Thirdly, provincial regulators, notably in British Columbia, have been cracking down on unlicensed retailers. That’s creating more room for licensed private and public stores to thrive. And the licensed retailers only carry product from publicly traded licensed producers.
That’s not to overlook some troubling issues plaguing the licensed producers, including a monumental loss in market capitalization during the past year. In addition, the cost of their weed tends to be significantly higher than what is available from private, unlicensed dealers.
Technical market analysts tend to look for a sign of a breakout rather than focusing on fundamental factors. And to see all these stocks behaving in more or less the same manner could be taken as an indication that the overall sentiment is changing.
But be careful—this market is not for the timid.