Great progress in terms of legalization was made for the Cannabis/Marijuana sector in 2020. The 2020 elections resulted in a number of US states engaging in new Cannabis friendly policies and laws being approved by voters. This suggests a new rally in the Cannabis sector may be setting up in 2021 and beyond for traders. Our BAN – Best Asset Now – trading strategy is always looking out for the next sector to make a trade, and the Cannabis sector is certainly one we are keeping our eyes on!
Weekly MJ Price Flag Setup
My research and I team believe the recent longer-term bottom in the MJ ETF, the Alternative Harvest ETF, suggests a broad bottom is setting up in the Cannabis/Marijuana sector. If this bottom in the Cannabis sector continues to profit support for the entire sector, then we may see price appreciation across many individual Cannabis stocks over the next 12+ months. Additionally, this price appreciation may prompt quite a bit of consolidation across the entire Cannabis/Marijuana sector.
The global use and demand for CBD & THC related products may continue to expand as medical and personal use expands across the US and into other nations. We are still near the infancy of understanding the true medicinal benefits of this all-natural product. A new upward price trend in this sector may prompt a global expansion/consolidation event where the Cannabis/Marijuana industry attempts to restructure into true global power companies.
Our research team is focused on the possibility that an early 2021 price decline in this sector may setup a broad sector bullish trend near March/April 2021 (or earlier). We believe the process of this longer-term bottom setup will still require another attempt to consolidate near the MAGENTA support channel before a more substantial breakout will take place. The current bottom setup is very similar to a Bullish Price Flag setup and we believe the next price low may be an area where real opportunity exists for a final bottom in price.
Monthly MJ Bottom Setup
The following Monthly MJ chart highlights the same bottom setup on a longer-term chart basis. Pay very close attention to how much volume has poured into this sector in October and November 2020. It is very likely that a new price low, below $11.90~$12.00, will setup within 4 to 8+ weeks that will represent the final downside price move before the Price Flag pattern attempts an upside breakout. We expect to see stronger volume surge into this final bottom as traders load up before the breakout move begins.
As we’ve been suggesting for a number of months, the broader, longer-term market cycles and trends suggest the next 3 to 5+ years are going to be very dynamic for various market sectors. Our research team believes the US and global markets have just recently started a broad depreciation phase which may last another 5 to 7+ years. Typically, within these phases, commodities and other sectors rotate in and out of favor as capital is forced to seek out undervalued and potentially explosive sector trends.
This bottom setup in MJ may prompt a number of individual Cannabis and CBD suppliers, processors, end-user manufacturers, and technology providers to engage in a series of acquisition and consolidation steps over the next few years if this sector becomes hot fairly quickly. Rising prices and expectations may prompt this industry into a consolidation and technology/distribution expansion over the next 4 to 5+ years. Very similar to the DOT COM/Technology bubbles recently, when a sector gets hot, it tends to prompt quite a bit of investment and activity surrounding the growth and consolidation of industrial components and technology.
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Chief Market Strategist