Cannabis Market Recap: CannTrust Holdings Inc, CannaRoyalty Corp, Aphria Inc And More

Benjamin A. Smith

CannTrust Holdings Inc (TSE:TRST) (OTCMKTS:CNTTF) (FRA:C9S), CannaRoyalty Corp (CNSX:CRZ) (OTCMKTS:CNNRF) (FRA:CY4), Aphria Inc (TSE:APH) (OTCMKTS:APHQF) (FRA:10E) all stood out, but for different reasons. Unfortunately, none of these issues could stem a marginal decline in the Canadian cannabis sector, and indeed CannTrust helped facilitate the weakness.

After a torrid two-week run, CannTrust came to a screeching halt as the company announced a $75 million bought deal financing (8,350,000 units) at $9.00/share. Predictably, that reality knocked the shares down to around the bought deal price, putting a temporary cap on investor enthusiasm. CannTrust finished off $0.80 to $8.86/share (↓8.28%), on the strongest volume in a year. It was also among the weakest issues in the market

CannaRoyalty Corp. did not encounter the same price action obstacles, however. The burgeoning California cannabis operator continued to grind higher, rising $0.10 to $5.15/share (↑1.98%). The company announced last night that it will host a conference call on Tuesday, May 29, 2018 at 8:30 a.m. ET to discuss its 2018 first quarter financial results and provide key business highlights.

Back on May 8, Midas Letter predicted CannaRoyalty would break out. We also believed price had a high probability of reaching the $5.70/share level in such a breakout scenario. With prices closing above the first resistance at $5.00/share for the second straight session, the odds of predictability have increased.

The one caveat is volume, which has remained rather uninspiring (but consistent). Should CannaRoyalty start flagging, it will be a situation where there wasn’t quite enough diesel in the engine to make it to its end destination.

Aphria also continued to show relative strength vis-à-vis its peers, only shedding $0.25 to $12.76/share (↓1.92%). This was slightly better than the ↓2.86% decline as registered by the Canadian Cannabis Composite Index.

We eluded to the fact yesterday that Aphria would continue to experience tailwinds from narrowing valuation spreads compared to its peer group—although we also expected the stock to re-couple with broad sector performance. Both things happened today, as relative strength continued, but without the strong out-performance encountered over the past week. Expect Aphria to have similar such days until valuation spreads narrow further.

Lastly, Aurora Cannabis had another rough day, as short term capital moves to the sideline. The stock declined $0.33 to $7.46/share (↓4.24%).

We think this eventually sets up a date with destiny at the 200-Day SMA ($7.05), where this key indicator is flanked with plenty of price support going back to November 2017. Undoubtedly, it will be a tough nut to crack; but it’s a level which needs to be tested for investors to move forward. Here’s the current technical take:

Any cannabis sector strength today was found in select small caps. Among the leaders were Cannabis Wheaton Income and Emerald Health Therapeutics. The latter has held up quite well (↓4.21%) since announcing a $16.8 million prospectus sale at $4.20/share yesterday morning. The Company intends to use the net proceeds of the Offering to fund the completion of its recently acquired Agro-Biotech facility in Quebec, working capital, and general corporate purposes.

Company Last Change % Change Volume
Namaste Technologies Inc. 1.7 0.11 6.92% 2.58m
Maricann Group Inc. 1.99 0.06 3.11% 868.05k
Cannabix Technologies Inc 1.85 0.03 1.65% 169.65k
Cannabis Wheaton Income Corp. 1.66 0.02 1.22% 1.32m
InMed Pharmaceuticals Inc. 1.02 0.01 0.99% 262.87k

Another notable mover was Namaste Technologies. The stock is up ↑61.90% since small cap cannabis stocks bounced six sessions ago. With a strong ten-percent move after 1:30 EST, it powered itself to the top of today’s leader board.

Namaste Technologies CEO Sean Dollinger talks operational strategy, new board additions, revenue projections, and more

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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