Canadian Cannabis Stocks Rebounded Smartly Wednesday, But For How Long?
Cannabis investors have finally received a reprieve from the massive selling underpinning the industry as of late. On Wednesday, Canadian cannabis stocks pared recent losses, rising 6.43% as constituted in the Canadian Marijuana Index. Nervous investors can at least get some modicum of restful sleep tonight.
Today’s rally continued the recent divergence between risk assets and cannabis stock performance. On a day where the S&P/TSX SmallCap Index fell 0.98%, cannabis did the opposite, finishing at the HODs. More importantly, it broke a streak of 5-consecutive losing sessions (and 9 of the last 10), which saw cannabis stocks crater almost 20% since the February 6th ‘volatility rout’ rebound high. To say the market “capitulated” again would not be an exaggeration.
Leading the way were the same beaten-down small caps names which lead the market lower. Apart from Cronos Group Inc. (see below), small caps dominated the tape. Notable strength was also seen in Newstrike Resources Ltd., which had been in free-fall since CanniMed Therapeutics Inc. (TSE:CMED) backed out of an acquisition agreement in late January. Midas Letter recently highlighted the plight of Newstrike, which according to TMX Money, is the most heavily shorted stock on Bay St.
Larger cap names did well also, albeit to a lesser extent. Aphria Inc. (TSE:APH) added 5.84% to $13.23/share; Aurora Cannabis Inc. (TSE:ACB) gained 5.16% to $10.40/share; and Canopy Growth Corporation (TSE:WEED) rose a more modest 3.40%.
The one large cap standout was Cronos Group Inc. (CVE:MJN). The $2 billion cannabis standout rose 21.92% to $11.79/share on 3.5-times average daily volume. Cronos began trading yesterday on the NASDAQ stock exchange under the symbol “CRON”.
We suspect the company benefited from the American public’s eagerness to invest in a respected, large cap cannabis producer. Currently, much