The next catalyst for marijuana investors may come from an obvious place: Big Tobacco.
While alcoholic-beverage companies have been active in the marijuana industry, Big Tobacco curiously has not.
But new comments made by an Altria MO executive show that the company is evaluating opportunities in marijuana. Altria owns Phillip Morris USA, which makes Marlboro cigarettes. Before digging deeper into the logic of cigarette companies getting into marijuana, let’s review marijuana stocks with the help of a chart.
Please click here for an annotated chart of marijuana stock Canopy Growth CGC. Please note the following:
• The chart shows the sell signal given by The Arora Report in June right at the prior peak. Subsequently the stock lost more than one-third of its value.
• The chart shows The Arora Report signal to buy Canopy Growth. When The Arora Report gives a buy signal, it simultaneously gives a target zone and a stop zone.
• The chart shows when Constellation Brands STZ, known for its Corona beer, invested about $4 billion in the company, paying a whopping premium of 51%.
• Just prior to the Constellation Brands investment news, Canopy Growth was well on its way to lose one-half of its value from the peak because it reported earnings below the consensus and significantly below the whisper numbers. Stocks move based on the difference between reported earnings and projections compared to the whisper numbers.
• The start of an “up” move in a stock on heavy volume is considered positive. The chart shows that there was heavy volume when the present up move started.
• The chart shows when Canopy Growth stock reached the price that Constellation Brands paid. The chart shows a red candle at that time, indicating that sellers were coming in. This was perfectly reasonable behavior on the part of the sellers because, under normal circumstances, the stock would have likely pulled back.
• The chart shows that after the red candle, rumors of more deals in the marijuana industry started. Those rumors moved the entire marijuana sector, including marijuana ETF MJ, Tilray TLRY, Neptune Technologies NEPT, Aurora Cannabis ACBFF, Aphria APHQF and Cronos Group CRON.
• Subsequently, rumors gained credibility on the news that Diageo DEO, the maker of Smirnoff and Johnnie Walker, was in talks with at least three Canadian cannabis companies.
• The chart shows the Arora signal to take more partial profits and to raise stops to protect the remaining profits right at the peak of the rumors. Afterward, a shallow pullback occurred. In highly volatile stocks, it is common for unrealized profits to turn into losses. For this reason, the trade-management guidelines that are provided to The Arora Report subscribers call for taking partial profits, usually in small tranches at appropriate times and raising stops. In practice, there are more nuances and more complexities that investors need to learn to consistently make profits than the simple foregoing statement. The foregoing statement is kept simple for the sake of readability…Read more at MarketWatch.
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