Bears Revenge: HMMJ, Prominent Cannabis Stocks Enter Bear Market Territory

Benjamin A. Smith

Cannabis stocks proxy Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) officially entered bear market conditions this morning. Amazingly, it took just five days to do so after attaining a record closing high on October 15th—two days before the advent of Canadian cannabis legalization. The extreme weakness is reminiscent of January’s harrowing dual declines, which sent prices spiraling ↓21.82 % and ↓37.08%, respectively, on a peak-to-trough basis. Even as the industry rapidly matures, sector volatility remains rampant.

For a few fleeting moments this morning, it looked as if cannabis stocks had found its sea legs. Sector captain, Canopy Growth Corp., tested and passed the key $46.10-46.50 levels, printing to as high of $47.83 within the first ten minutes of trade. With overall sector technicals looking atrocious, market participants again looked for Canopy to stem the selling tide, as it has on so many prior occasions. Constructive close or not, it wasn’t to be.

For the third consecutive session, the market sold heavily into the fleeting morning strength, taking out $46.10-46.50 support and forging 5-week lows with ease. More representative of the onslaught were prices of HMMJ, reaching official bear market status by printing at $20.84 at 10:20 am EST. After some very weak consolidation, prices again surged lower. At publishing time, HMMJ declined $2.45 to $20.48 (↓10.68%).

The extreme technical damage hitting individual names is quite pervasive, and not limited to Canadian licensed producers. U.S. cannabis stocks, as defined by the United States Marijuana Index, are lower by almost ten percent. Practically everyone is suffering in a congruent manner, with no discrimination between small, mid and large caps.

(As of 12:55 pm, EST)

Company Last Change % Change Volume
Namaste Technologies Inc. 1.86 -0.36 -16.22% 6,877,510
The Green Organic Dutchman Holdings 4.19 -0.74 -15.01% 2,358,070
Emerald Health Therapeutics Inc. 3.34 -0.57 -14.58% 1,146,022
The Supreme Cannabis Company Inc. 1.55 -0.26 -14.36% 3,087,057
Newstrike Brands Ltd. 0.54 -0.09 -14.29% 3,530,103
Tilray Inc. 125.02 -20.28 -13.96% 2,723,925
HEXO Corp. 5.82 -0.89 -13.26% 10,801,973
Aurora Cannabis Inc. 11.44 -1.57 -12.07% 40,527,333
Auxly Cannabis Group Inc. 1.03 -0.14 -11.97% 5,130,826
Isodiol International Inc. 2.65 -0.36 -11.96% 186,341

(As of 1:19 pm, EST)

Company Last Change % Change  Volume
Cannex Capital Holdings Inc. 0.61 -0.1 -14.08% 230,742
MedMen Enterprises Inc. 7.41 -1.09 -12.82% 2,636,863
GrowGeneration Corp. 3.5 -0.42 -10.61% 146,654
MPX Bioceutical Corporation 1.02 -0.12 -10.53% 2,711,825
MariMed Inc. 4.31 -0.5 -10.39% 664,152
KushCo Holdings. 4.94 -0.55 -10.02% 628,115
CV Sciences Inc. 5.07 -0.53 -9.46% 1,113,262
Liberty Health Sciences Inc. 1.3 -0.13 -9.09% 1,433,491
Golden Leaf Holdings Ltd. 0.2 -0.02 -9.09% 2,269,934
Charlottes Web Holdings Inc. 15.35 -1.43 -8.52% 213,598

For veteran cannabis investors, this bearish impulse will come as no surprise. Canopy Growth has endured at least eight such similar impulses—defined as price drops of at least 20% or more within a two week span—since November 2016. Every single occasion provided a gift for long term investors to add to positions. Will it be the same this time? Although investors must make their own determinations, it’s hard to envision any deterioration in Canopy’s long term bull outlook with U.S. and international expansion still in its nascent stage. The company is about to close it’s $5 billion direct-equity stake deal with Constellation Brands Inc., giving it the firepower to branch out in ways most LP’s can only dream of.

The next notable levels on HMMJ and Canopy Growth (CGC) are $20.27  and $40.68, respectively. We shall provide further technical updates once a more solid sector bull case has developed—beyond a couple dabs of sunlight.

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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