Top Marijuana Stocks – Introduction

Whether it’s lighting a joint or eating an edible, people generally like to get high!

Investors have also been getting “high” on the back of marijuana stocks in recent years.

The marijuana industry has taken Wall Street by storm with legislation slowly shifting in its favor.

This is one of the hottest sectors so far in 2019 and offers promising conditions for us as traders!

There are strong catalysts for opportunities such as Canada’s recent legalization of marijuana at the federal level. Or the fact that the US is also making progress towards legalization. More and more states are approving marijuana  Whether medically, recreationally or both!

Check out the image below for a breakdown of the US States and their legalization status:

Marijuana Stocks: US States Legalization

Marijuana Stocks: US States Legalization

The passing of the Farm Bill is also likely to lead to wider availability of CBD products in the market and will provide an opportunity for companies to expand into these products lines.

There is optimism that the United States will eventually follow Canada in legalizing marijuana.

The industry is really still in its infancy but there are a few names that are setting themselves apart from the pack early on. These are the companies that are carving out their competitive advantages through strategic acquisitions, partnerships and offering a diverse range of products.

In this post, we will take a look at our favorite three marijuana stocks to keep in your watchlist for 2019.

Top Marijuana Stocks – Build a Sector Bias with the Marijuana Index

Before we take a look at individual names, it’s important to be conscious of how the overall cannabis sector is performing.

Why is that? Simply to put the probabilities in your corner! Imagine buying a stock while the rest of the sector was bleeding. What’s more likely? Do you see a massive breakout with follow through? Or…does the stock stall and rolls over to take you out for a loss? Tracking an index of the sector will help you identify the right conditions to know when to hold em and fold em while managing a trade.

The North American Marijuana Index, which tracks the leading stocks in the cannabis sector that operate in the US and Canada, helps us achieve this. It is a great tool to track the overall performance of the sector, with the added bonus that you get to find good companies to add to your watchlist. To filter out the riskier names, we prefer to trade the tickers that are listed on the NASDAQ, NYSE or TSX exchanges.

With that said, here is the list of constituents that make up the index for those interested:

Marijuana Stock Index

Marijuana Stocks Index

As we were saying earlier, it’s important to know how the sector is doing. If you will be trading pot stocks in 2019 you have to keep track of the index!  Take note of the tickers that tend to perform best when the overall watchlist is green across the board. You’ll want to be buying the strongest stocks during bullish conditions in the index.

Alternatively, when the stocks in the watchlist are bleeding on the day, note which ticker often tends to be the weakest? Which is the strongest? These are little clues that can help you identify the right pot stocks to trade through different conditions in the markets.

So how is the index currently performing? See below:

Index Performance

Marijuana Stocks: Index Performance

Marijuana Stocks: Index Performance

The 52-week high is at $365.25 while the low sits at $184.80.

2018 was a rough year for marijuana stock investors, however, traders enjoyed volatility to the downside! We’ve seen a nice bounce off the lows into the new year and the index is currently trading at $299.41.

This is well off its lows and could be a potential signal that a press towards the $300 magnet might be in store for 2019. A move above this level could see us test the 52-week highs above $365.

If we continue to see positive catalysts coming out of the US as more states adopt marijuana in the coming year, we could break out above the $365 and trade into uncharted territory on the index. A term we often refer to as “blue skies” in this industry.

This would provide us with the confirmation that the green rush is back on and that we can look to get positioned in individual names to capture the opportunity for the next leg.

Now that you know where the overall sector is at and that we are ripe for upside, let’s took a look at our three favorite marijuana stocks for 2019.

Top Marijuana Stocks – #1 – Canopy Growth Group (Ticker: CGC)

The Canopy Growth Group is the first marijuana company to be listed on the NYSE.

This makes it the world’s largest publicly traded weed company!

They grow and sell recreational and medicinal marijuana.

Some of the things we like about this company include:

  • Highest market cap of any Canadian marijuana stock
  • Extremely competitive production capacity
  • $4 billion investment from Constellation Brands (Ticker: STZ) provides cash stockpile larger than peers
  • Strategic partnership with Constellation gives a competitive advantage to Canopy
  • Subsidiaries operating in international medical marijuana markets
  • Extensive supply agreements throughout Canadian provinces
  • A wide range of product lines (high-quality herbs, oils, concentrates, and gels)
  • Opportunity to expand operations into the US on the back of the Farm Bill

Technical Breakdown

Let’s take a quick look at the technicals of this stock:

Canopy Growth Technicals

Canopy Growth Corp Daily Chart

Canopy Growth is trading well above it’s 2019 open at $26.52 and has retraced more than 50% of the drop from the 2018 highs at $59.25.

The market is trading above the 50 and 200-day moving averages which means the current trend is bullish. The bounce in January on the back of heavy volume suggests the bulls are back in town.

The market is currently consolidating the move from January and is forming a tight symmetrical triangle continuation pattern above the 50-day moving average at the$44.00 mark.

We will want to see a daily breakout and close above $48 on high volume in order to signal a potential bullish run above the $50 handle and into the 2018 highs above $59.25.

Keep an eye on this ticker in your marijuana stocks watchlist for 2019.

Top Marijuana Stocks – #2 – Aurora Cannabis (Ticker: ACB)

Aurora Logo

Aurora Logo

Aurora Cannabis is another major Canadian player in the cannabis industry that trades on the NYSE.

They are primarily focused on the medical marijuana industry and are the major competitors to Canopy Growth Corporation.

Some of the things we like about this company include:

  • Recent acquisitions of CannaMed and MedReleaf make ACB one of the biggest medical marijuana suppliers in Canada
  • Competitive production capacity
  • Second largest cannabis company in the world by market cap
  • High profile appointment of American billionaire and investor Nelson Peltz as a strategic advisor
  • Consolidating operations will help cut costs and gain efficiency
  • Subsidiary in international medical marijuana market (Pedanios GmbH)

Technical Breakdown

Let’s take a quick look at the technicals of this stock:

ACB

Aurora Cannabis Daily Chart

Aurora Cannabis is trading well above it’s 2019 open at $4.89 and has retraced more than 50% of the drop from 2018 highs at $12.53.

The market is trading above the 50 and 200-day moving averages which means the current trend is bullish. The bounce in January on the back of heavy volume suggests the bulls are back in town.

The market is currently in a strong bullish trend with lots of volume confirming the upside momentum. This stock had resistance at $8.22 which held for several tests before the breakout gap last week on record volume.

There is room for this stock to run to the upside into the $12.00 handle. This happens to be the upper bound of the 2018 trading range and a level that has held as a ceiling on two previous tests making it a likely target for the bulls.

We really like this stock into 2019 and will look for pullback opportunities to get positioned for a potential rip higher.

Top Marijuana Stocks – #3 – Cronos Group Inc (Ticker: CRON)

Cronos Group Logo

Cronos Group Logo

Cronos Group Inc is a Toronto-based cultivator of medical marijuana and the first pot stock to be listed on the Nasdaq exchange.

Although they are not the biggest company by revenue or planned marijuana production, they are one of the few cannabis companies with serious financial firepower and access to supply-chain, branding, and regulatory expertise.

Some of the things we like about this company include:

  • Third largest cannabis company in the world by market cap
  • $2 billion investment from Altria (Ticker: MO) provides large cash stockpile for expansion efforts.
  • Strategic partnership with Altria gives a competitive advantage to Cronos
  • Operating in international medical marijuana markets (ships product to Germany, building facility in Israel, license through a joint venture in Australia)

Technical Breakdown

Let’s take a quick look at the technicals of this stock:

Cronos Group Daily Chart

Cronos Group Daily Chart

Cronos Group Inc is trading well above it’s 2019 open at $10.25 and is actually above it’s 2018 high at $15.30.

The market is trading above the 50 and 200-day moving averages which means the current trend is bullish. The breakout in late January on the back of heavy volume suggests the bulls are back in town.

The market is currently consolidating the move from late January and is forming a range between the 2019 highs at $25.08 and the range swing low at $18.72.  The 50-day moving average is also around $19.14 and should act as dynamic support.

There is a potential pullback buy opportunity around the range lows if we get a test and failure of this level in the coming weeks. Alternatively, a strong daily breakout and close the current all-time highs at $25.08 could see this stock make a push for the $30 handle and potentially the $50 for year-end.

This is another great pot stock to keep a close eye on for 2019. Watch for the pullback and the breakout and look to capitalize on the opportunity if a signal comes.

Top Marijuana Stocks – The Bottom Line

There is little doubt in the profit potential of weed. The industry is moving at an incredibly fast pace! New innovations in growing technology and medical treatments continue to popping up consistently.

The push for marijuana legalization in the United States is growing stronger and stronger on the back of legalization in Canada last year. Even though it’s not federally legal quite yet, the US has come a long way on the idea of marijuana legalization.

As more and more states begin to accept and legalize marijuana, the cannabis industry will offer investors and traders growth, legitimacy and the potential for big profits!

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The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.