Interest in Marijuana Stocks Is Fading, And That’s Trouble for ACB Stock

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ACB stock - Interest in Marijuana Stocks Is Fading, And That’s Trouble for ACB Stock

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Back in late October, yours truly here cautioned that Aurora Cannabis (NYSE:ACB) was a dangerous prospect despite the marijuana-legalization buzz that was palpable at the time. ACB stock rallied sharply through the middle of last month, but the underpinnings for that strength weren’t built to last. It wasn’t just ACB stock that was setting some traders up for disappointment though. Peers and rivals like Tilray (NASDAQ:TLRY) and Canopy Growth (NYSE:CGC) were vulnerable too.

Hope you were listening. Suspiciously, though almost all stocks were up on Monday when normal trading resumed following the Thanksgiving lull, Canopy Growth and Aurora stock were both notably in the red, with the former on the cusp of breaking below a major technical support level.

In simplest terms, the buzz is already wearing off. Traders are losing interest, and that’s the worst thing that could happen to hype-hungry pot stocks.

When the Smoldering Stops

There’s no denying the marijuana legalization movement is for real. There are proven medical benefits, and each time voters go to the polls in the United States, it seems like pot makes progress. Most of the rest of the world is even further down cannabis-acceptance road than the U.S. is.

There’s also no denying, however, that marijuana stocks thus far have relied tremendously on hype that obscures the number-crunching investors would do for most other types of equities. And as the old cliche goes, live by the sword, die by the sword. Aurora stock and others in the cannabis arena have mustered some big rallies in recent weeks, but in retrospect, the only thing that may have been doing that lifting is a mania that’s now fading… and fast.

Take a look at all the Google searches for the terms “Aurora Cannabis” and “Aurora stock.” Both surged in September, and popped again in October right around the stock’s move to an NYSE listing.

Source: ThinkorSwim

Since then, searches for Aurora and its derivatives have slumped, along with ACB stock.

Source: ThinkorSwim

It’s not just Aurora though. Tilray has also been through a similar rise and fall in terms of Google searches, which has been mirrored by TLRY stock itself. “Tilray” and “TLRY stock” saw a swell of searches leading up to September peak.

Source: ThinkorSwim

TRLY stock itself peaked in September as well. Yet, interest in owning Tilray shares has faded in step with the decline of Google searches for Tilray.

Source: ThinkorSwim

Yes, the same story has more or less played out for Canopy Growth. “Canopy Growth” and “CGC stock” both popped in August in response to news that beer and spirits company Constellation Brands (NYSE:STZ) made a major investment in Canopy.

After a modest slide, interest surged again into October, perhaps fueled by the realization that marijuana was on the ballots in several U.S. states. Since then though, interest has faded rather quickly.

Source: ThinkorSwim

That waning interest coincides with a pullback from CGC stock that’s left it on the brink of a cross below its 200-day moving average line, plotted in white.

Source: ThinkorSwim

Bottom Line for TLRY, CGC and ACB Stock

It’s not information that means nearly as much for more conventional, established stocks. For story stocks like these though — and story stocks that are also part of a politically-charged, full-blown movement in particular — it’s concerning data.

This is an industry that’s years away from justifying outlandish valuations, and the only thing that’s going to keep their stock prices propped up is strong interest in the premise regardless of fiscal results. That interest is evaporating fast, as it has before with ideas like VoIP, meal kits and most recently, cryptocurrency.

The good news is, the marijuana movement is here to stay. Investors can at least count on these names seeing renewed interest around election times, and in step with legalization progress here and abroad. The waiting is the hardest part.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.


Article printed from InvestorPlace Media, https://investorplace.com/2018/11/interest-in-marijuana-stocks-is-fading-and-thats-trouble-for-acb-stock/.

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