Marijuana stocks — are they worth your money? David Kretzmann, chief analyst with Motley Fool, believes that cannabis is in a good position to become the new crypto. Imagine buying Bitcoin back in 2013, when one coin was worth only $130, and selling it for $19,535 at the end of 2017. In the above-mentioned period BTC grew 150 times. Not all agree that marijuana stocks will ever demonstrate suchlike growth. However, it is without doubt that this brand-new asset class can be of great value to investors who know how to trade it.
Starting today, six cannabis stocks and one cannabis ETF will be added to the IQ Option platform (to be traded as CFDs). Read this article to learn more about this asset class and ways to trade it. But first, take a look at the full list of new assets:
|Asset name||Asset type|
|AURORA CANNABIS INC||Stock|
|CANOPY GROWTH CORP||Stock|
|CRONOS GROUP INC||Stock|
|GW PHARMACEUTICALS — ADR||Stock|
|TILRAY INC-CLASS 2 COMMON||Stock|
|ANHEUSER-BUSCH INBEV-SPN ADR||Stock|
|ETFMG ALTERNATIVE HARVEST||ETF|
Why to trade cannabis CFDs on stocks?
For years, marijuana trading was an illegal pursuit of wannabe gangsters. It all changed in 2012, when Colorado and Washington became the first two states to make recreational use of cannabis legal. Since then, several major companies have been operating in the sphere of cannabis cultivation and distribution. Some of them went public and opened their arms for international investors.
Don’t be surprised that changes in the US legislation have triggered a cascade effect. The United States is the world’s #1 cannabis manufacturer. Moreover, 16.3% of its 327 million population is said to use cannabis.
As of now, marijuana is fully legal in four countries: Canada, Georgia, South Africa and Uruguay. That makes companies from the USA and Canada undisputed industry leaders. According to several experts, marijuana production, as any other young industry, offers unmatched opportunities to those who 1) will pick the right companies to invest in, 2) will do so faster than the rest of the market.
How to trade marijuana stocks?
There is no single best strategy to trade marijuana stocks (as to any other exchange-traded asset). Over the course of several years the marijuana industry has turned from an illegal activity into a multibillion-dollar business. Knowing when to buy and sell stocks of the respective companies can yield impressive results.
Remember that despite all the hype surrounding it, marijuana still has a lot in common with less fancy commodities. Droughts and downpours can, and mostly certainly will, influence the supply and the market price of marijuana. Poor crops generally translate into lower stock prices. Seasonality also comes into play, as it does with corn and potatoes.
Other factors, such as management initiatives, buybacks and cost-cutting programs have a direct influence on the stock price, as well. After all, from the market’s point of view, marijuana manufacturers are just companies selling their products. The more money they make, the higher their stock prices will climb, and vice versa. Inability to deliver tangible results will lead to a contraction in the market cap.
Technical analysis indicators that work with other stocks will work great with marijuana stocks, as well. Come up with a trading system of your own and see if it works for the company of your choice. More about technical analysis here.
Note that shares of cannabis-related companies, despite high expectations and medium-term growth potential, can depreciate just as any other asset. When working with IQ Option you do not have to buy company’s share in order to sell them. As with any other asset, traders consider opening a short (sell) position when a price decrease is expected. You have an opportunity to speculate on both positive and negative marijuana stock price movements. Right now the industry is volatile and the trading volume is high, which means that there are numerous trading opportunities present.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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