Since the beginning of the year, a slew of new news has led to the speculative decline of some of the most popular stocks in the industry. This negative advancement has not at all shown the true value behind the marijuana industry, but rather has followed news sources and the sentiment they share. The industry on cannabis has been on the up and up for some time now and with legalization happening around the world in places like Canada and beyond, it seems like the only place to go is up.
The cannabis industry is very much based on the idea of speculation. This is so given the infancy of the market as a whole. When markets are very young, they tend to react more highly to news than other more established markets. The true nature of many stocks in the industry cannot fully be realized because of this. One example comes from that of Canopy Growth Corp (OTCMKTS: TWMJF). The stock saw an appreciation rate of over 220% during the 2017 year. This positivity quickly came to an end as many different news pieces hit the industry in the beginning of the year.
The current state of cannabis is seeing a correction in the market that is bringing prices down and up in a rapid way. This high level of volatility has been quite a large issue for the market, because many people are unable to accurately value companies as well as figure out which stocks to invest in. Many are stating that there a few indicators that we can expect to see in the near future that will help to determine when this correction will be over. One of the first indications that this correction will end is the development of technical price patterns in the market.
According to one report “The technical price pattern on this chart is a symmetrical triangle. These develop when the price action is characterized by a sequence containing a series of lower highs and higher lows. Defining this pattern is as simple as connecting the respective level of higher lows and lower highs.” This type of pattern can help to somewhat predict what will occur in a time period with a given market. The study goes on to state that “Triangles are known for their strong breakout patterns, and therefore a resolution of this pattern is expected to produce a powerful result. The converging nature between price support and price resistance causes “energy” to build on either side of support and resistance as traders position themselves for a possible resolution.” The marijuana industry should be looking out for these types of patterns as they can often help to predict where the future of the industry could potentially go. It seems as though the market could continue to move in a bullish direction given the price action of some stocks in the recent times.
The month of May has already begun to look as though it will be positive for the cannabis industry. Several high level officials have stated their support for the cannabis market, which has helped to resolve to some extent, the uncertainty that many investors have felt in the market. Given that the industry is still very much in its infant stages, this type of speculative price action is expected to go on for some time. The hope is that the market will begin to calm down as more legislative measures begin to represent what the people of the U.S. actually want. Only time will tell how well these new measures can begin to affect the market.
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1 comment
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