Today, cannabis stocks are once again making their way onto investor watch lists ahead of what could be some pivotal upcoming legislation. Accordingly, shares of Aurora Cannabis (NASDAQ:ACB), Tilray (NASDAQ:TLRY), Sundial Growers (NASDAQ:SNDL) and Canopy Growth (NASDAQ:CGC) all surged higher this morning, before giving up much of their gains in early afternoon trading.
This morning’s price action appears to be a continuation of some strong bullish sentiment building in this sector. Following legalization north and south of the border, investors in cannabis stocks have been waiting patiently for positive movement on the legislative front in the U.S. Thus far, it appears President Joe Biden’s administration has been less warm to the idea of cannabis legalization than initially thought. Accordingly, this sector has been selling off since his election, when interest once again piqued in this sector.
Today, investors are attempting to price in the likelihood of the MORE Act being passed. Let’s dive into what investors are watching with this federal legalization bill.
What’s Driving Volatility in Cannabis Stocks Today?
This morning’s price action appears to suggest there remains a strong contingent of investors bullish on the potential for federal cannabis legalization in the U.S. Today, a scheduled hearing on this act, which would decriminalize cannabis at the federal level, has brought newfound excitement to this speculative sector.
That said, speculators have been let down by this growth sector for some time. There are many reasons for this. Anticipated growth rates factored into these stocks in 2017 and 2018 were not realistic. Indeed, movement on legalization outside of a few small markets has left investors in a precarious position.
That said, the potential for the MORE Act to pass could change the game altogether. Should this bill pass, cannabis companies may finally be able to capitalize on sales across state boundaries.
An affirmative vote on Friday from the House could pave the way for this bill to be passed. Unfortunately, expected opposition from the U.S. Senate could leave this bill DOA. Accordingly, this afternoon’s price action appears to reflect investors’ fears that this bill will stagnate at the end of the day.
Right now, cannabis stocks could be among the most volatile equities in the market. For some investors and traders, this is a good thing. For most long-term investors, it’s really hard to gauge what the outcome of this Aat will be. Thus, I’m watching this price action comfortably from the sidelines right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.