Volatility is a staple of the markets in 2018, as cannabis stocks go on a downward spiral.
On Friday morning, cannabis stock plunged for the second time. This caused panicked selling and buying shorts to continue to push uncertainty in the Canadian marijuana industry forward.
The Canadian Marijuana Index fell by 15 percent within the 1st hour of trade time. It had not even recovered 10 percent by noon. Including the 11 percent drop that occurred on Thursday, it is now at its lowest since December 2017. It continued to drop on Monday morning as well.
The biggest producers are being hit the hardest. Aurora Cannabis Inc. went down $1.48 or 12.65 percent, to $10.22 on 30.9 million shares. Aphria Inc. dropped $2.19, or 12.39 percent, to $15.48 on 8.9 million shares. Whereas, Canopy Growth Corp. the largest player fell $3.47, or 11.19 percent, to $27.55 on 9.4 million shares.
“All the big names are getting hammered,”
This was stated by the author of the BCMI Cannabis Report, Chris Damas, in a morning report. He went on to say this decline would be a great entry point for day traders with cash, but those with an overflow of stock should watch the market cautiously.
The entire market is in a downward spiral
For more than a week the entire marijuana market has been on a decline. The Canadian Market has lost more than 30 percent, from the start Monday. Cannabis stocks seem to be leaning more towards the TSX Venture Exchange. Stock analysts who watched the dropped on Thursday were not concerned, many of them believe the drop is a welcome back to reality. Equity analyst, Russel Stanley stated there was no reason why the stock spiked in December, so there is a reason for the reverse occurring. Despite the decline that is occurring it has been reported that the market is still sta very healthy growth rate.
Another analyst from Eight Capital, Daniel Pearlstein, stated that one reason for the decline could be the recent overflow of financial distribution.
“a number of very large finances in the space over the last few weeks, and there was a lot of new capital issued that the markets have to churn through,”
Equity Research’s Managing Director, Martin Landry stated the supply of stock appears to outweigh the demand.
“There’s been more than $1 billion raised in January for cannabis producers … so it’s sucked a lot of demand.”
He continued by saying, “it is healthy, in a sense, to see a pullback, it brings back a new wave of investors for the next leg up.”
Many analysts have different views on the market decline
Some analysts believe that the news reports may be adding to the change in the sector, stating that the announcements may be creating negativity in the minds of the company owners within the U.S. Others, on the other hand, are seeing the decline from a positive perspective, they believe that it is a positive thing, at least, from a risk perspective.
“Whatever factors are causing the drop, stock prices may continue to decline, at least in the short term.”
Analyst from PI Financial Corp, Jason Zanberg estimates another 10 to 15 percent decrease before the market straightens out.
Landry predicts that the upcoming weeks will be strained, although many incitements are coming within the next month, this is going to uplift the market and the companies again.