By Nigam Arora
When marijuana stocks were rising, many investors got caught up in the excitement and bought large quantities at high prices. Now some are sitting on massive losses. At the same time, another group of investors who paid attention to money flows made significant profits.
Just like a doctor who uses X-rays to see what is going on inside the human body, investors can do X-rays of marijuana stocks. Segmented money flows provide that information. That’s what we at The Arora Report use. (For more on this, please see: “How to potentially become a marijuana millionaire, albeit carefully.”)
Let’s examine the latest money flows in marijuana stocks. Please click here for a chart showing segmented money flows in 17 popular marijuana stocks.
Please note the following:
• Marijuana stocks have pulled back as the short squeezes that were the real reason behind their rise ended. Short squeezes created a lot of artificial buying. When the artificial buying went away, marijuana stocks fell. For example, Tilray /zigman2/quotes/209129655/composite TLRY +3.34% ran up to $300 in a short squeeze, and it has now fallen to around $30. The Arora Report gave a signal to short sell Tilray as high as $280. Partial profits have been taken but a very small quantity is still being held. Our zone to buy to cover for Tilray has been $24 to $31.57. The stock is now in the buy-to-cover zone, but the target zone may be further lowered. Investors ought to make a distinction between buying to cover a short position and buying long a new position.
• As The Arora Report has previously published, smart money flows have been negative in Tilray for a while. Finally momo (momentum) crowd money flows have also turned negative after staying positive through most of the decline in the stock. In plain English, this means that as Tilray fell, the momo crowd continued to buy it and is now beginning to book the losses. In general this is a good development. When the momo crowd has realized all of the losses, then Tilray stock will have a shot of rising again. Note that under the “short squeeze” column in the chart, it says “extremely positive” for Tilray stock. In plain English this means that if a short squeeze starts, it can easily run up Tilray stock again.
• Canopy Growth /zigman2/quotes/200603886/composite CGC +4.56% is the blue chip of marijuana stocks. Those who believe in the long-term future of marijuana may consider holding a very small quantity of Canopy Growth in a core marijuana portfolio and then trading around that position with shorter-term trade-around positions.
• As shown on the chart, smart money flows in Canopy Growth are neutral. The ideal buying opportunity would be if the stock were to go lower and smart money flows turned positive. The low band of our buy zone is $24. However, investors ought to size the position correctly. The recent earnings from Canopy Growth were worse than the whisper and consensus numbers. If it was not a marijuana stock, it would have fallen to $18.
• Smart money flows are neutral in Aphria /zigman2/quotes/207425803/composite APHA +7.64% , MedMen /zigman2/quotes/201940908/composite MMNFF +6.44% , Craft Brew Alliance /zigman2/quotes/209915231/composite BREW +0.54% and New Age Beverages /zigman2/quotes/200595917/composite NBEV +3.74% .
• As the chart shows, smart money flows are negative in Curaleaf /zigman2/quotes/205334348/composite CURLF -0.10% , Liberty Health /zigman2/quotes/204270480/composite LHSIF +0.84% and Acreage Holdings /zigman2/quotes/205165963/composite ACRGF -1.39% .
• As the chart shows, smart money flows are negative in marijuana ETF /zigman2/quotes/204332491/composite MJ +2.79% but momo crowd money flows are positive.
• Smart money flows are positive in Corbus Pharmaceuticals /zigman2/quotes/201549545/composite CRBP -1.31% .
• Smart money flows are negative in GW Pharmaceuticals /zigman2/quotes/209686240/composite GWPH -1.33% , KushCo Holdings /zigman2/quotes/209165034/composite KSHB -0.75% , Scotts Miracle-Gro /zigman2/quotes/200553749/composite SMG +0.25% and Constellation Brands /zigman2/quotes/207737284/composite STZ +1.24% .