The only constant in the stock market is change. Pot Stocks are not immune to market trends.
Trends come and go, sometimes lasting for days, sometimes weeks or months or even years. But nothing lasts forever in the world of trading stocks.
Take, for example, marijuana stocks. Last year, it was all about pot stocks in the trading sphere. The sector was beyond hot, with plenty of emerging companies and opportunities for traders.
But what’s going on with pot stocks now, in 2019? In this post, I’ll explore the evolution of the cannabis stock trend, including how the trading opportunities have changed and expanded.
How the Trend Began
In October of 2018, Canada officially legalized marijuana. To say that this event had an effect on the trading world would be a vast understatement. It was like a modern gold rush!
Not only did this legalization mean a huge surge of pot-related business in Canada, but it was seen as a harbinger of future legalization in other major countries and economies. In short: traders saw it as an opportunity to get in on the ground floor.
There was an immense and immediate interest in Canadian pot stocks, including growers and distributors, but also ancillary businesses including growing supply manufacturers and the like.
Just as in a gold rush, the siren call of potentially making a fast fortune was alluring to traders. It was an intoxicating time to be active in the market!
However, a trend usually can’t remain that strong for a sustained period of time, so does that mean that the time to buy pot stocks is over? Not necessarily, but it’s important to acknowledge that things have changed.
The Sector Evolves: CBD
As the legal landscape around marijuana changes, there continue to be opportunities for traders.
While the pot sector may not be as red-hot anymore, there’s been a recent branching off within the general marijuana sector that has become its own emerging trend and sector: CBD.
CBD, which is short for cannabidiol, is a by-product of the marijuana plant. Unlike the compound THC (the stuff that gets you high), CBD is non-psychoactive.
In spite of the fact that it won’t give you a buzz, CBD still offers the medicinal benefits of marijuana. These include the reduction of pain, anxiety, alleviating cancer-related symptoms, and more.
So what caused the sudden interest in CBD?
Early this year, the U.S. Farm Bill passed with an approved proposal to legalize industrial hemp — the main source of CBD.
Traders took note. While marijuana legalization may still be a way off in the U.S., the Farm Bill made CBD a more immediate opportunity for trading.
Where CBD had previously existed in a kind of legal limbo state and wasn’t widely available, the Farm Bill’s passage meant that now, CBD could be manufactured on a much larger scale, and could be sold in mass retail outlets.
What’s Happening Now?
So … what’s happening now with pot stocks? My thought is that now, the trending sector has evolved into CBD-related stocks.
The Farm Bill acted as a massive catalyst for CBD-related companies. Given that the bill officially passed, CBD stocks could be considered less speculative than pot stocks in the U.S.
Now that they can offer their products to a wider variety of customers, these companies have the ability to ramp up production and increase profits exponentially. This means that there’s a distinct potential for growth in the near future for these companies.
Right now, a lot of CBD operations that are established are being wined and dined by big players in healthcare and food sectors. This means that in the months and years coming, there could continue to be a big surge and opportunity for growth in this sector.
SwingTrades With Paul Scolardi
I’m Paul Scolardi, a longtime swing trader as well as the lead teacher at SwingTrades.
As a swing trader, I focus on trying to forecast the trends in the near future. Sure, I consider what’s hot right now, but I also want to see how the market’s trends may evolve in the future to potentially give me an edge.
During my career, I’ve located future trending sectors by looking for and finding earnings winners, sector leaders, and hot IPOs.
Are you interested in swing trading? Join my SwingTrades program.
In the program, I assist my students in becoming self-sufficient traders. My method? Teaching them what I’ve learned over the years about identifying potential momentum stocks. At this point, I’ve taught over 1,400 students from 50 different countries!
Remember: Trading requires lots of hard work and dedication. No matter how much you study and prepare, there are always factors in the market that you can’t anticipate. Trades are always executed at your own risk.
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Have you traded in the CBD or marijuana sectors? What has been your experience?