This Cannabis Company Will Probably End Up in the Dustbin of Wall Street History

Like many marijuana stocks, this pot company loses money and is probably destined for the dustbin of Wall Street history, but it may be setting up for a low-risk, high-reward short term investment. Cannabis Sativa, Inc. (OTCMKTS:CBDS) is involved in many areas of the cannabis industry. There are definitely some lessons to be learned from a situation like this, Here are five things to consider:

This Marijuana Stock Will Probably End Up in the Dustbin of Wall Street History

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Radar Screen: This stock got on to my radar screen because it is in the cannabis industry.  it has also dropped 70% since September. Anytime that a stock falls that dramatically in such a short period of time, there is always a chance of a rebound or  a ‘dead cat bounce’.

Fundamentals: The company has been losing money for years. Last year’s loss was (.20) per share.

Technicals: The stock is oversold and at levels that were support in the past. The $2 level was support last September, and after the recent selloff it has become support again. In addition, it has been in a clear downtrend . Because it is oversold and at support, there is a significant chance that it could rebound off of these levels. If it does, it seems like the next important resistance level is around $2.70. This level was support in December.

Risk Management: We need to understand that humans have not evolved in a way that is conducive for successful trading or investing. When money is on the line it incites an emotional response. Fear of taking a loss makes investors hold on to losers for too long. Fear of missing a profit causes investors to close out their winners too early. That is why you should never enter a position unless you know where you will take your stop-out loss and where you will take profits. This is the most important rule of investing!

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Here is what I would do. The trigger to enter the trade would be the break of the downtrend line. My stop-out would be at $1.95 and my sell price is $2.65. The sell price for taking a profit is just below a level that will probably be resistance.

The sell price for taking a loss is just below important support. That is because if the support breaks, the stock could trend much lower.

As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities. 


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