Lessons Learned from the 2018 Marijuana Hype Run

In 2018, I saw a huge opportunity in trading cannabis stocks, thanks to Canada moving towards legalization under Prime Minister Trudeau. This shift turned companies like CGC, ACB, APHA, and CRON from little-known penny stocks into major market players almost overnight. My strategy was to ride the wave of excitement and speculation leading up to legalization. I focused on understanding the market's momentum, aiming to capitalize on the surge in investor interest. This period was a turning point, showing how political changes can create lucrative opportunities in the stock market.

In the early stages of my trading journey with cannabis stocks, I zeroed in on the momentum building up towards Canada's legalization. My strategy was to pinpoint companies positioned to benefit from this shift. I wasn't just chasing any stock; I looked for those with solid potential for growth and market impact. My favorite edge was playing oversold bounces using the backburner trade strategy which worked extremely well. Understanding the regulatory landscape and investor sentiment also played a crucial role in identifying these opportunities. This wasn't about blindly throwing money at the market; it was a calculated approach to select stocks that stood to gain the most from legalization, setting the groundwork for strategic entry and exit points.

My "sell the news" strategy was built around the hype leading up to Canada's legalization day. I anticipated that the climax of investor excitement would peak just before the actual legalization, creating a prime opportunity to sell. This approach is counter to the more common, long-term investment strategy where investors hold on to their stocks to benefit from the market's gradual growth. Instead, I focused on the immediate run-up, aiming to capitalize on the heightened speculative interest, and then selling off my positions right before or on the day of legalization, betting on the idea that most of the positive news had already been priced into the stocks.

Navigating the cannabis stock market in 2018, I faced significant challenges and backlash, especially around my "sell the news" strategy. Critics emerged as I took profits earlier than many expected, arguing for a longer-term investment approach given the sector's growth potential. Additionally, the post-legalization period revealed unforeseen issues like government mismanagement and stock dilution, validating my cautious stance. Despite these hurdles, my focus on timing and market trends underscored the importance of adaptability and strategic decision-making in trading volatile markets.

In my approach to technical trading tactics with cannabis stocks, I employed the "blue sky breakout" strategy, focusing on momentum and trends. I aggressively bought stocks showing strong closes, anticipating further gains, and sold them on gap-up opens to capture profits from overnight interest spikes. This method emphasized timing and market sentiment, requiring a keen understanding of when to enter and exit for optimal returns. My success hinged on reading market trends and leveraging them, demonstrating the effectiveness of a well-timed, technical strategy in a volatile market.

Having a team of members within our dedicated MJ trading room also was a pivotal element. The power of hundreds of eyes sharing news and price movement meant that I was up to date with the space, all the time!

In managing risks while trading cannabis stocks, I focused on balancing aggressive moves with strategic caution. This meant setting clear stop-loss levels to minimize potential losses and being disciplined about taking profits, even if it meant exiting a position early. The volatile nature of the cannabis market underscored the importance of not getting too attached to any single trade. My approach was dynamic, adapting to market changes and always being ready to reassess my strategy based on the current market environment and trends.

Reflecting on my journey trading cannabis stocks, I've learned the importance of timing, market sentiment, and adaptability. My early and aggressive profit-taking, while criticized, taught me that following one's strategy amidst market euphoria is crucial. The experience highlighted the unpredictability of speculative markets and the need for constant learning. I've become more adept at interpreting market signals and adjusting strategies accordingly. This journey has not only been about financial gains but also about the invaluable lessons in trading discipline, risk management, and the significance of staying informed and flexible.

We now look for the Cannabis run in the US with the possibility that the DEA reschedules Marijuana from Schedule I to Schedule III under the Controlled Substances Act (CSA), which will bring volatility and opportunity for this sector.

Learn more about the players in the US Cannabis market in this factsheet