The month of October was terrible for the marijuana Exchange Traded Fund MG Alternative Harvest ETF (MJ). After some months in which we witnessed the share price of the marijuana ETF climb higher, we saw it drop like a rock following the October 17 date for the legalization of marijuana in Canada. For October, MJ was down just slightly more than 27%.
MJ rose and fell due to some big winners followed by big losers in the marijuana industry. But the problem is, the moves we have seen by these stocks have for the most part been based solely on speculation and rumors. We have not received an earnings report indicating profits from Canada were going through the roof; we receive any real meaningful information from the companies themselves that would have indicated now was the time to buy because the stock prices were just going to run higher. It was all just speculation and hype that was causing stock prices to move higher. I recently warned investors that now was not the time to jump on the MJ train, back when the ETF was at loftier levels, but now that is has fallen, you should remain on the sidelines and see how things play out in the industry.
The first reason of why is because of the recent decline the industry has gone through. The majority of the drop has been due to nothing more than profit-taking after the boom, ‘hype cycle’ played out leading up to the October 17 legalization of marijuana in Canada. Common sense would say the marijuana stocks would climb higher after the law went into effect. But all too often, the opposite happens because the ‘hype’ over the recent change dies off after the actual event takes place, and no new information comes available to keep the ‘hype train’ rolling. Savvy investors bought shares of the marijuana stocks ahead of the legalization date, road those stocks higher due to the “hype” and then sold them after the October 17th date when the catalyst for the move higher played out.
Which leads us to reason two of why you should stay on the sidelines. Continue reading "It's Still Not Time To Buy A Marijuana ETF"
