Canadian marijuana producers have been one of the hottest places to invest and over the last month, this sector has been trading higher on very strong volume.
A lot of this volume has been on the buy side and this has caused momentum to surge higher. Currently, Canopy Growth (WEED.TO) (TWMJF), Aurora (ACB.TO) (ACBFF), MedReleaf (LEAF.TO) (MEDFF), CannTrust (TRST.CN) (CNTTF), and CanniMed Therapeutics (CMED.TO) (CMMDF) are trading at overbought levels.
This rally has caught the attention of many investors and we have seen tremendous capital enter the market and LPs have seen a significant increase in the average daily trading volume on a month-over-month basis.
2017 is Looking a Lot Like 2016
In early October, we published an article discussing how Canadian marijuana producers were starting to break out and that the rally was being supported by strong volume.
We are favorable on this trend and look back to the fourth quarter of 2016 to find a similar trend. If this rally is anything like what we saw last year, this could just be the start of a big cycle turn. One of the most important technical indicators we monitor is the Relative Strength Index (RSI), which measures a stock’s momentum.
As buying volume increases, momentum or RSI trends higher and this is a bullish indicator for stocks. If you look at this metric for Canadian licensed producers, there is a lot to be excited about.
5 Momentum Driven Marijuana Producers
We want to highlight how these stocks have performed over the last month and how volume has changed during this time.
Canopy Growth (WEED.TO) (TWMJF)
Over the last month, Canopy Growth has rallied more than 55% and the marijuana producer has shown no signs of slowing down. Last week, Canopy’s volume surged higher and the company traded more than 13 million shares per day on average (103% higher than Canopy’s average volume over the last month) and we are monitoring this trend closely.
There have been many catalysts to support this rally but none has been more significant than Constellation Brands’ (STZ) $245 million investment in Canopy Growth. We remain favorable on Canopy’s long-term outlook and will monitor how this rally continues.
Aurora Cannabis (ACB.TO) (ACBFF)
Last week, Aurora Cannabis rallied more than 47% and the shares moved higher on very strong volume. When compared to Aurora’s average volume over the last month, the marijuana producer’s average daily volume last week was 233% higher (more than 600% than the average volume over the last quarter). Several broker dealers have raised their price target on Aurora and we remain bullish on the long-term outlook.
MedReleaf (LEAF.TO) (MEDFF)
MedReleaf rallied more than 25% last week and this rally took place on strong volume. When compared to the last month, MedReleaf’s daily average over the last week was 132% higher (380% higher when compared to last quarter).
MedReleaf’s market cap is north of 1.5 billion after the recent rally and we are keeping an eye on how the shares continue to move. We are favorable on MedReleaf and continue to view the marijuana producer as a long-term investment opportunity.
CannTrust (TRST.CN) (CNTTF)
In late August, CannTrust went public and commenced trading on the Canadian Securities Exchange. This marijuana producer has been one of the hottest stocks to own and the shares have rallied approx. 150% since they started trading.
Last week, CannTrust rallied approx. 20% and the shares have been trading at overbought levels. We are bullish on this marijuana producer’s long-term outlook and investors need to keep CannTrust on their radar.