Cannabis ETF MJ Basing & Volatility Patterns

Volume started increasing near mid-September as the price of MJ fell below $15. This support level originated from late December 2020 after a significant rally trend from recent lows near $10 – when the Reddit retail trader event started to unfold.

I wrote about this sector and these opportunities in many articles before the incredible rally in late 2020 into 2021.

What I find interesting are two things. First, the recently proposed cannabis reform legislation may prompt a nationwide declassification of marijuana as a class-3 drug. This change could open every state, consumer, industry, and banking/financial institution to kick the doors wide to participate in the cannabis industry. Secondly, this industry is well past the initial stages of growth and attrition from many years ago. Now, established players and proven markets are competing for market share. This creates a very competitive and dynamic environment in this sector.

What I believe can happen over the next 10+ years is a simple consolidation of the industry around centralized components of the cannabis market. And a renewed focus on federal approval and tracking related to “seed to consumer” regulations. My opinion is that the industry will see weaker players acquired by stronger players while startups still try to dominate the fringe market. These startups will likely be disruptors in the industry, just like independent brewers are popping up all over the US right now.

A Technical Look At cannabis etf MJ And The Pending January 2022 Apex

Technically, I see a very large Pennant/Flag formation on this Cannabis MJ chart. The formation leads me to believe early January could prompt a base or bottom near $13.25. I see the long-term support level, originating from the bottom in March 2020, as a very critical price level. This support level will likely prompt the current price to try and hold above $12.75~$13.00 as the final waves of the Pennant/Flag trend unfold.

If my wave count is correct, the price will attempt to bottom near $12.75~$13.00 soon. After this, the Cannabis MJ price will try to rally up to $15.25 to $15.75 before the end of 2021. A final downward price wave may push the price below the $13.00 level again as volatility becomes more elevated near the Apex of the Pennant/Flag formation. The Apex takes place near the end of January 2022. Therefore, traders should consider looking for buying opportunities near or below current support (somewhere near or below $12.75 to $13.00).

The Cannabis MJ chart shows price is attempting to confirm the lower support channel. If this lower support channel fails, we would wait for a new price trend to establish a new price pattern – hopefully providing better future guidance. Currently, this extended Pennant/Flag price formation appears to be trending and confirming nicely.

My belief is MJ will start at Apex near the end of January 2022. Meaning we should expect bigger price volatility and the potential for a “blow-off” price rotation sometime after January 15, 2022. Most Apex setups result in a type of wild rotation in price that I call a “blow-off” price rotation. Ideally, traders want to ride out the “blow-off” rotation and try to catch the breakout or break-away trend when it starts.

Daily MJ Chart Shows Clear Price Trending In Support Of The Lower Price Channel

This Daily MJ Chart highlights an upward price channel recently set up after price retested the $13.00 lower support level. If you understand the five waves of a Pennant/Flag formation, you’ll quickly understand there are two immediate potential outcomes for the price right now. First, the price could fail to stay within this channel and break downward – retesting the $13 lower support channel again (or possibly trend a bit lower). Second, the price could have already confirmed the $13 lower support channel and is in the process of moving higher – targeting the $15.25 to $15.75 level.

We are seeing some basing/bottoming in On Balanced Volume and a very large increase in the Daily trading volume recently. Both of these indicate traders are accumulating shares of MJ in preparation for a price move.

With pending cannabis reform legislation and President Biden likely to support this new economic frontier, any federal decriminalization of cannabis would potentially prompt a wave of buying within this sector. Given the current Pennant/Flag formation in MJ, traders may be already looking for opportunities in the cannabis sector. MJ could rally back above $20 to $21 fairly quickly.

Be patient, though, as this Pennant/Flag formation won’t be complete until sometime after January 10th to 14th. Plan how you expect the markets to trend throughout the end of this year. Watch how MJ reacts to the final three price waves of the Pennant/Flag formation. As we approach early 2022, the cannabis sector could become a leading one if the new cannabis reform legislation gets closer to becoming law. We may see another rally, like in early 2021. We may see MJ rally well above $25 if traders start chasing a breakout trend.

Want to learn more about the cannabis sector and others?

Follow my research and learn how I use specific tools to help me understand price cycles, setups, and price target levels. Over the next 12 to 24+ months, I expect large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase. Next, a revaluation phase may begin as global traders attempt to identify emerging trends. Precious Metals will likely start to act as a proper hedge as caution and concern drive traders/investors into Metals.

Kindly take a minute to visit to learn about my Total ETF Portfolio (TEP) technology and how it can help you identify and trade better sector setups. My team and I have built these strategies to help us identify the strongest and best trade setups in any market sector. Every day, we deliver these setups to our subscribers along with the TEP system trades. You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

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Why Pension Funds Invest in Cannabis?

Pension funds are getting exposure to Canadian cannabis producers

In 2018, the AP7 Swedish fund bought the shares of Canopy Growth (WEED CN) and Aurora (ACB CN) for about 63 million Swedish crowns (~ $7 million). The main reason is that these stocks were included in the MSCI All Country World Index (ACWI). This does not happen only in Sweden. Last year cannabis producers were acquired by Canadian and US pension funds, in particular, Canada’s Public Sector Pension Investment Board (PSP) and the California Public Employees Retirement System (CalPERS).

It is quite gratifying to note that pension funds are diversifying their portfolios by the producers of “Herb”. I believe this suggests that more and more investment managers in the world (even conservative ones like pension funds) come to believe in the idea of “Cannabis”. I think that, apart from the inclusion in MSCI ACWI, the legalization of cannabis in Canada also played a significant role.

Many companies continue to expand into export markets, in particular, European markets. Canopy Growth recently announced that they had completed the purchase of Cafina, a certified Spanish manufacturer. In my opinion, this asset will allow the company to strengthen positions in the EU. After all, Canopy already has facilities in Denmark and Germany.

Key market players continue to increase their production capacity

In particular, Aurora recently announced that they had expanded the product growing areas from 1.3 million to 1.62 million square feet (+25%). Theoretically, this will increase the company’s annual productivity to 230 thousand kg, making Aurora one of the leaders of the industry along with Canopy Growth.

It has been reported recently that CannTrust (TRST CN) also had similar progress. The company made an announcement on the purchase of large areas for the cultivation of cannabis. The company has acquired 81 acres of land (about 33 hectares) and plans to purchase a total of about 200 acres (81 hectares), which would allow increasing the production capacities to 300 thousand kg per year.

The sector continues to grow and develop. An important factor is that most companies are already listed at the New York Stock Exchange. The recent pullback, in my opinion, has more to do with technical factors rather than fundamental ones.

Besides, the market’s expectations were probably over-inflated. This factor clearly illustrates the fall of CannTrust, which is explained by the fact that the Net loss was below the consensus. The company will report on the first quarter of 2019 on May 15. I am looking forward to it.

From early 2019 to about mid-March, single stocks showed quite impressive growth, in particular, CannTrust and Organigram doubled their market cap; Canopy Growth and Aurora grew by 70%, and Aleafa by 60%… It was followed by a completely natural correction. I have to repeat that the correction was more of a technical rather than fundamental nature.

Although it is impossible to predict everything, I believe that the downtrend will hardly last long. I still believe that this sector has great growth potential. CannTrust, Organigram, Canopy Growth, and Aurora are still my favorites. Small manufacturers like Aleafia and Wayland, which may be pulled up with the sector.

The article was written by Evgeny Kogan, Ph.D., investment banker, the author of the telegram-channel Bitkogan.

Canadian Pot Firms – The Triggers for Future Growth

I am still convinced that the cannabis industry is nothing less than a new economy rather than just another bubble. What is equally important, it is a very actively growing economy that looks for ways for rapid expansion.

Let us recall that after the official legalization in Canada in October, the stocks of ‘plant growers’ sank. “Buy the rumor, sell the fact” came into play. The depth of correction was quite strong, which, I have to confess, was a surprise for me.

Interestingly, January was marked by return to growth, and some people managed to partially (some even completely) recover from October. Today I would like to focus on a few points concerning individual names and the field on the whole.

What are the triggers for the future growth of companies in the field?

Increased risk appetite. It feels like the ‘green’ stocks bounced back after the correction that took place in early February. Recently, stock prices have grown at a decent pace, which, in my opinion, was due to several reasons. First, the general market, on the whole, is in a positive mood. Secondly, investors’ risk appetite is likely to increase against this background.

Growth in the sales of therapeutic ‘plants’ in Canada. Many believe that the first results of the sales are disappointing. Excuse me, gentlemen, only a few months have passed since the legalization and if anybody was waiting for fantastic sales right away, that was a mistake. I wrote about these overstated expectations, as well as the risks of this field back in May. I assume that we will observe a real sales’ growth in Canada in the 1st-2nd quarters of 2019.

Development of export destinations. Many companies expand into international markets. CannTrust, Canopy and others supply the medical ‘plant’ to Europe and Australia. The growth of cultivation capacity will lead to a growth in export flows. Moreover, we should keep in mind that the cost of the product in Europe is significantly higher than in Canada.

Cooperation with related fields. According to some estimates, due to legalization, the companies that produce ‘appetite supporting products’ will be able to attract some of the alcohol producers’ clients. I have to note that alcohol producers are aware of the danger of losing some part of their consumers and are down to taking certain actions. For example, the company Constellation Brand has increased its stake in Canopy Growth to 40%. I do not exclude that the transaction activity of M&A in this field may grow further, which implies that larger players will swallow up the smaller ones. The goal of the larger ones is obvious: they plan to scale up their business. I do not exclude that the activity of large funds may grow and they will probably want to increase their stake in the market leaders of this dynamically growing sector. In this regard, medium-sized companies ($ 1.0 – 1.5 billion) will be in the spotlight. There is also a possibility that two average performers will merge with a view to confronting leading players. In addition, sensing a competitor in the market of sedative agents, alcohol producers and pharmaceutical companies may also be active in this field.

NYSE listing. A lot of Canadian cannabis producers are musing about and planning to be listed in New York, which would be quite favorable for their stocks. With all due respect for Canada, there is more liquidity and a “higher quality” of investors in the United States.

Possible legalization in the United States. There is much talk about the possible full-scale legalization of the plant in the United States. The healing ‘plant’ is currently legalized in a dozen states, but it is likely to spread to the entire country in the coming years. By that time, Canadian cannabis producers will spring up like mushrooms, increase production and be ready to expand. I suppose that any speculation on the legalization in the United States will become a serious trigger for the Canadian sector.

In anticipation of reports

Several companies, in particular, Aleafia (ALEF, March 4), HEXO (HEXO, March 13) and CannTrust (TRST, March 29) are expected to publish financial reports in March. Organirgam (OGI) and Canopy Growth (WEED) have already published reports. In general, the results were received quite favorably in the market. I do not exclude that the situation may repeat itself in one form or another in March.

The ‘green meadows’ are going to be quite interesting in the near future. The field continues to grow. At the same time, the stocks of ‘plant growers’ are still quite volatile, and there is a possibility of dips, possibly strong ones. Such dips allow me to plan for a cheaper buyback.


I keep a positive view on the sector. Use temporary dips in stocks to increase and average your position. No fanaticism, please.

I expect a significant improvement in companies’ financial indicators and an increase in stock prices and continue to hold stocks of companies such as TRST, ALEF, HEXO, OGI and EMC in expectation of significant mergers.

The article was written by Evgeny Kogan, Ph.D., investment banker, the author of the telegram-channel Bitkogan.

Please let us know what you think in the comments below.