Home Stock Trading Strategies Dope Stocks ACB and CGC Begin Crash Landing – Mike Swanson (11/19/2019)

Dope Stocks ACB and CGC Begin Crash Landing – Mike Swanson (11/19/2019)

Dope stocks – AKA cannabis stocks – completely collapsed AGAIN yesterday as ACB dumped 16.48% to make for an ugly price chart.

ACB tried to make a bottom in August at $5.50 and failed. In October it tried to hold the $3.50 level and failed again.

The decline is now straight down for the stock to make for a waterfall price decline.

People holding it are now going through hell and it isn’t fun. The same thing is happening in big cap dope stocks across the board like CGC and TLRY.

Is this going to lead to a crash landing?

It’s not the bottom yet, but there will be one coming.

Last year dope stocks were the hottest small cap speculative sector in the financial markets and at the start of this year people piled so much money into them that Robinhood traders made ACB the top stock owned by the most number of people that trade through them.

Even today it remains number one on the list as you can see here.

Young people like Robinhood, because it has a fun trading app and when you open up an account with them you can get a free share of stock. Twice as many people on Robinhood own ACB than AAPL while less than 6,000 of them own GDX or GLD.

People bought these dope stocks with little idea of what their earnings were or what was on their balance sheet. They didn’t realize that they were debt monsters. All they knew at the start of this year is that people talked about them a lot and the stocks had gone up a lot in the past, but few of these buyers had any knowledge of the details of the companies. They bought on pure emotion and now are selling on pure emotion.

The problem is that reality is hitting that the companies can’t make a profit and ones like ACB are so much in debt that they are at risk of going bankrupt.

But a rally is likely to come out of this price collapse.

Here is the deal. All of these people on Robinhood and elsewhere are holding the bag. We are now approaching the end of the year so many of them will end up selling in disgust to turn their losses into realized losses that they will be able to put on their tax forms next year.

This sets up a situation where mass selling is going to hurt these dope stocks from now till the end of the year.

But it will end and lead to relief rally – and a short covering rally – as a lot of institutions and hedge funds are short dope stocks. They also have no reason to realize those gains now when they can defer them to next year.

The reality is the sectors that do the worst into Thanksgiving tend to collapse in mass selling in December in a washout bottom. This trend is simply starting early for dope stocks.

So there is a potential trading opportunity for us here to keep our eye on for later.

But these stocks are good only for trades and not for investments as the companies are junk and the stocks are in deep stage four bear markets now trading below their 200-day moving averages.

For real buys look elsewhere. My top stock pick for this month is on fire and attracting the big money as a billionaire just took a 20%+ position in it!

While dope stock balance sheets are blowing up several big cap mining stocks such as Kirkland Lake have boosted their dividend payments by 50%.

Meanwhile the folks at oilprice.com are eyeing a big mining play in Africa led by Stan Barhti. This is the man who created Desert Sun Mining back 15 years ago – a stock I bought for around $1.00 that got bought out for over $9.00 a share in what was the deal of the year in the mining world back then.

The bottom line is there will be trades for dope stocks when they complete this stock crash process, but the true place to invest now is in the mining space.

Making money in the markets enables us to go anywhere and do just about anything we want. I got a lot of interests and am working on a new book about the Vietnam War. I talked about that topic with Chuck Ochelli in a podcast I just posted on the site you can find here:

https://wallstreetwindow.com/2019/11/podcast-1968-the-tet-offensive-and-the-vietnam-war-with-chuch-ochelli-mike-swanson-11-19-2019/

-Mike