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Cannabis Stocks Plunge As Marijuana Markets Collapse On News Of Justice Department Policy Reversal

Cannabis stocks fell dramatically on Thursday as news that U.S. Attorney General Jeff Sessions directed the Justice Department to reverse course on Obama-era policy sent marijuana markets tumbling into a downward spiral. Investors went into a panic, halting the months-long rally and reversing record highs seen on all major marijuana-related indices. Another day of record highs on Wall Street and Canada’s leading stock exchange did nothing to offset investor fears that the cannabis sector would fall into disarray under the new policy. Even as industry insiders took to the press to try and alleviate fears and bolster confidence, companies big and small saw share prices sink. Major ETF’s that had investors comparing cannabis to bitcoin only 24 hours earlier lost as well, as Sessions’ announcement reverberated across the border and into Canada. The fundamentals of the marijuana markets are in shambles, as an uncertain future leaves cannabis investors pondering where to go next.

Around The Markets

It was another day of record highs on Wall Street and Canada’s top exchange, although that news was secondary in light of Sessions memo outlining the Justice Department’s new take on cannabis. There was reliable economic data from the manufacturing and services sectors, as well as numbers showing better-than-expected hiring levels from private employers. Wall Street continued its post-new year rally on the back of the steady data, with the Dow Jones Industrial Average going over 25,000 for the first time. The Nasdaq and the S&P 500 continued their winning streaks as well. In Canada the Toronto Stock Exchange had another record day as well, closing at 16,412.94 for a 0.25 percent gain.

The Cannabis Stock Index

420 Investor’s Cannabis Stock Index, which examines both the medical and recreational sectors ended its two-month rally on Thursday, falling to 156.12 from yesterday’s record high of 180.02. The Index lost 23.9 points for an over 13 percent loss which can be entirely attributed to the news out of Washington. Returns are at 9.9 percent for the year.

Solactive North American Medical Marijuana Index

Also falling on Thursday was Solactive’s North American Medical Marijuana Index, which had experienced record gains on a daily basis since mid-November. The Index closed at 1787.98, a significant drop from yesterday’s high of 1962.69. Sessions announcement effectively killed a two-month rally, causing the Index to lose almost 10 percent on Thursday.

The North American Marijuana Index

MJIC’s North American Marijuana Index, the more volatile of all the indices, took a dramatic hit on Thursday following the announcement out of the Justice Department, as investors pulled out in droves from both US and Canadian stocks. All gains made from the past few days were wiped out within hours, as news out of Washington drowned out the positive buzz from California’s recreational market. The North American Marijuana Index closed at 304.78, falling 38.53 points for an 11.22 percent loss. Most of that came from the U.S., which took the brunt of the bad news coming out of the Justice Department. The United States Marijuana Index fell 22.50 points for a  21.29 percent loss. Canadian stocks did not make it out of the day unscathed though, as the cannabis industry as a whole suffered from Sessions’ announcement. The Canadian Marijuana Index fell 60.41 points, closing at 889.85 for a 6.36 percent loss.

Horizon ETF

A 10 percent gain in one of cannabis’ strongest funds yesterday was all but erased on Thursday as the Horizon’s Marijuana Life Sciences Index ETF fell 9 percent. The fund closed the trading day at $21.31, down $2 on a volume of 3558356.

MJX vs. HMMJ, January 4, 2018 Source: Bloomberg Markets

ETFMG Alternative Harvest ETF (MJX)

The rock-star fund of the cannabis world just 24 hours ago due to its incredible increase also dropped on Thursday, losing $2.34 for a 6.19 percent loss. Yesterday investors were praising the funds $164-million in net assets, but by today the news out of Washington had investors scrambling. The fund closed at $35.47.

Winners and Losers

Winners were few and far between when it came to cannabis stocks on Thursday. CanniMed’s hopeful partner Newstrike Resources Ltd. (HIP:CA) closed at $1.080, gaining  $0.150 on higher than average volume trading. The company saw shares increase an impressive 16.13 percent on an otherwise rough day for cannabis stocks. The next closest stocks were Supreme Pharmaceuticals Inc. (SL:CNX) and Tetra Bio Pharma Inc. (TBP:CNX), both of whom broke even on Thursday, which is the closest thing to a win on the worst day for cannabis stocks in over a year.

Conversely, there were losses up and down the industry on Thursday, with Cannabics Pharmaceuticals Inc. (CNBX) leading the pack. Company shares fell $0.970 per unit on higher than average volume trading for a 36.47 percent loss. Surna Inc. (SRNA) declined $0.091 per share on higher than average volume trading for a loss of 31.49 percent. One of today’s more vocal companies when it came to the Sessions announcement, Terra Tech Corp. (TRTC) saw share prices fall $0.129 per unit, a 31.31 percent loss.

Stocks to Watch (And Watch Out For)

On an extraordinary day for the cannabis industry, picking a single stock to watch becomes difficult. Investors would be wise to keep an eye on the industry as a whole for the next few days, with extra focus on the major funds for a sense of whether or not there will be a recovery from today’s announcement. Either way, it is an essential day for cannabis stocks, as the moment has come for the industry to stand its ground behind public opinion. The marijuana markets will be made in the next few days and the next few months. Will Canada abandon the U.S. in favor of its own gold mine, or will it stand by in solidarity? Will a broken Congress band together or will it continue to fall in line behind a puppet administration? How far will federal prosecutors go now that they have the latitude to prosecute?

Right now, there are just too many questions.

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