MJ, time for a secular bull run in Marijuana stocks (Yes Really)

22 בספט׳ 2023

MJ
Here I am timing an entry into the MJ ETF as it makes a recent major correction. MJ has gone thru a massive secular bear market since it’s high of $34.5 in February of 21. It has been going down ever since for 2.5 years. Why? Because a lot of investors were hopeful that with a democrat in the white house marijuana will be legalized. But it became clear over time that the Biden administration was not serious on delivering that promise. Most famously was their federal decriminalization of marijuana possession, which turned out to not free a single man from prison in America! Of course, they already knew the impact before rolling this policy change. These matters are studied closely in the Whitehouse but their pursuit was just for the headlines.

Not to mention Biden’s firing of several Whitehouse staff who while passing the drug test for employment had been found to have used marijuana in the past or are pro legalization.
People realized that the administration is more interested in posturing than delivering and thus marijuana stocks kept trending down.

So, given the above, why will Marijuana stocks trend up? Because Biden needs to run for elections again. This means he needs to resuscitate the promise of legalization one more time.
President Biden’s current approval numbers are very low (38%). He needs to dangle that carrot of legalization to solicit votes.

This was confirmed when the department of Health and Human Services (HHS) recently recommended that marijuana be moved from schedule I to Schedule III under federal law. Such recommendations are not done in a vacuum. They are done with coordination with the Whitehouse.
This has important implications medically, but also for the investment world. That is because many funds can’t invest in marijuana stocks currently since it’s a schedule I drug. There are federal punishments on the books for such investments, it’s just that the government chooses not to prosecute anyone for them. So the space currently has conflicting laws, if you will, as opposed to clear ones.

It doesn’t matter if Biden is going to deliver on this promise or not. This will cause a bullish run now into the November of 2024 at a minimum. Furthermore, if a republican wins the Whitehouse, I am more confident that marijuana will be legalized (any candidate except Pence). Reason being that Republicans don’t want this issue to be used by democrats for fund raising or as a campaign promise in the future. Not to mention that the marijuana lobby sponsors republican congressmen too! marijuana is popular with the Republican base as well (55% support).

Now let’s look at MJ technically. It has already corrected by 21% from it’s recent high.
At my shown support level (cyan arrow) this correction will equal a 28% drop once reached. This is an excellent risk-to-reward level for a quick bounce and ideally for maintaining at least a portion of the position as a long-term investment. Why? Because MJ snaps back up (every time except once) when the correction reaches the 20s or 30s. So if we buy it on a 28% correction we only have to endure a further 12% decline before the thesis fails as a worst case scenario. And as a statistical worst-case scenario we can see a bounce of 15%. So this serves as a level where a breakeven scenario exists as failsafe.

You may ask why not wait for a deeper correction? Because I don’t think you’re going to get one. You see MJ has snapped up by 65% in less than a month. This is not a bullish correction in a bearish trend. This is a change in trend. To put this in perspective, this move is the 2nd largest bullish run after a correction for MJ ever. And the others happened during a bullish market. This is why I don’t see it dropping further than my support level shown + risk of 12% (stop loss). Also, the other deeper corrections happened during a bearish trend, not in a consolidation phase or a bullish trend.

Anyhow, this is my due diligence on MJ. If you like my work here give me a boost. I am buying MJ with my money. But as always, you do you!
Good luck.

3 באוק׳ 2023

עסקה פעילה

My entry here has now triggered. The support level shown by the cyan arrow (entry) is at $3.34 which MJ has crossed today before making a low of day of $3.28. It then has reverted back to $3.41 where it has closed. Not bad. That is only a drawdown of 6c or 1.8%.
So this is a live trade now. I am expecting the price to bounce up at least to $3.72 before potentially retesting my support again or just continuing to new highs. It's possible to exit there for a trade but as mentioned this is an investment for me. MJ is beginning a bullish secular trend. So I will stay. This is basically an investment that I also timed as a trade for improved entry. So far so good.