Cannabis sector negativity and weakness persists, so the group continues to be a buy.
Now it is time to continue to average in at current prices, ahead of the next catalyst-induced move up.
The problem here is that it is nearly impossible to predict the timing of the next catalyst. But because cannabis is an election issue and this is an election year, I am fairly certain that a catalyst will occur in the coming weeks or even months.
The options are: progress on rescheduling which is now in the hands of the Drug Enforcement Administration and Department of Justice (DOJ); progress on SAFER cannabis sector banking reform in the Senate; and progress on a “Garland memo” which would be a memo for DOJ head Merrick Garland stating that federal prosecutors will take a hands-off approach to enforcing cannabis laws in states where cannabis is legal.
For simplicity, consider my two favorite exchange traded funds (ETFs) in the space: AdvisorShares Pure U.S. Cannabis (MSOS), and the 2x leveraged version AdvisorShares MSOS 2X Daily (MSOX).
Also consider options trades. Puts rise in value as stocks or ETFs fall. So, consider shorting naked puts in the current weakness. Consider selling the July 19 expiration MSOS puts with a strike price of 8 which you can currently sell for 50 cents a contract.
If you sold covered calls into the May 16 rally and you can currently buy them back for around five cents a contract, consider doing this so that you are free to sell covered calls again or sell the underlying positions into the next rally.
Also consider any of our portfolio names, a collection of the best companies in the sector. Portfolio names are: Ayr Wellness (AYRWF), Cresco Labs (CRLBF), Curaleaf (CURLF), Cronos (CRON), AdvisorShares Pure U.S. Cannabis (MSOS), AdvisorShares MSOS 2X Daily (MSOX), ETFMG Alternative Harvest (MJ), Green Thumb (GTBIF), Organigram (OGI), Tilray Brands (TLRY), Trulieve (TCNNF) and Verano (VRNOF).
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