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April 25, 2018, 2:03 p.m. EDT

What to expect from marijuana stocks after the first big medical cannabis win

Companies including GW Pharmaceuticals could be takeover targets

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By Nigam Arora


GW Pharmaceuticals
A patient takes GW Pharmaceuticals’ Savitex treatment. The British company now has an epilepsy syrup in front of a U.S. FDA advisory panel.

Fortunes may be made in legal cannabis over the coming years. As a result, bullish sentiment is building on cannabis stocks both for recreational and medicinal uses.

Adding to the bullish sentiment is the first-ever cannabis-based medicine to get a favorable recommendation from an advisory panel to the U.S. Food and Drug Administration. This is a big win for cannabis.

The drug, a syrup called Epidiolex, is from GW Pharmaceuticals   to treat childhood epilepsy. The medicine doesn’t have any psychoactive effects.

Let’s explore this Cambridge, England-based company with a chart, the fundamentals and then I’ll review other cannabis stocks. GW Pharmaceuticals, founded by two doctors, trades on the Nasdaq Stock Market in the U.S.

Chart

Please click here for the annotated chart of GW Pharmaceuticals stock. Please note the following from the chart:

• The stock recently moved up in anticipation of a favorable recommendation by the FDA panel.

• The stock price is now in the resistance zone shown on the chart.

• The move is on heavy volume.

• The relative strength index (RSI) shows that there is room to run.

Read: John Boehner is joining a marijuana company

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

Fundamentals

This epilepsy drug has potential to generate over $1 billion in sales by 2022. The drug is derived from cannabidiol, or CBD. CBD has many medicinal properties that help a variety of conditions. The drug contains less than 0.1% tetrahydrocannabinol, or THC, which has mind-altering effects.

The company also has a pipeline of other promising cannabis-based drugs.

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