The best plays in the cannabis sector right now, in terms of % gain potential from current prices, are the ones that nobody knows about yet — they are still undiscovered and they often carry some type of risk
That’s why they are priced where they are and undervalued relative to their peers
The discovery process itself is the fertilizer for any cannabis stock, the mechanism through which cannabis stocks make their biggest % gains, which is why I aim to identify a stock before it gets discovered by the market
Sometimes that requires some patience, while you wait around for the market to discover your stock, but there’s simply no substitute for the potential reward possessed by undiscovered gems
In this type of market, investors seem drawn to the most beaten-down stocks that have been high flyers in the past, as long as they are in the right category
CNABQ fits the bill on all accounts
It’s a very high reward play that carries risk due to the lack of clarity moving forward
This is a very unique situation, and given how hot the MJ sector has been so far in 2021, and is expected to be moving forward with the prospects of The SAFE Banking Act and MJ Legalization, the potential rewards here merit it worth the risk for me
Right now CNABQ is not an AMMJ, which from my standpoint is the top MJ stock in the sector today in terms of its combination of % gain potential and risk/reward ratio
AMMJ is a low risk/high reward MJ stock
CNABQ is a higher risk/high reward MJ stock
In terms of its reward potential from current prices, based on its longer term trading history, as well as its more recent trading history over the past few weeks, along with the trading action in its peers, the potential upside in terms of % gain for CNABQ is undoubtedly quite high:
So what I know right now is that even while the bankruptcy case was moving through the courts, CNABQ found its bottom and traded sideways within a defined range for about 4 months, from mid-September 2020 to mid-January 2021 — that was an important signal for me
After the bankruptcy case was dismissed on 1/13, more money came into the stock and it broke out of its range to the upside, skyrocketing +157% in one day once it broke through a key resistance level at .01, so the market obviously liked the dismissal of the bankruptcy
It then entered a period of consolidation and bounced off its new support level, putting together two big % gain days of +50% and +32% last week, while also closing above its 200 day moving average on consecutive days at the end of last week, something which hadn’t happened since September 2019:
Now if one is just looking at the chart, which is how a large segment of investors decide what stocks to buy, here’s the IPA theory for CNABQ in a nutshell:
“The stock was a really high flyer in the past — the last 2 times the MJ stocks got really hot, it was a total moonshot, skyrocketing over $3 in 2016 and $2.50 in 2018”
“All the MJ stocks tanked during the past few years and CNABQ was no exception”
“It bottomed out in April 2020, then it rebounded a bit, moved sideways for awhile, and then continued to go down alongside the other stocks in the MJ sector during the summer”
“It put in its lowest bottom in November 2020 at a price very close to the intraday bottom it put in back in April, and every time it tested the bottom of its trading range in October, November and December, it got bought up by the market”
“An inverse head and shoulders pattern has formed, and ever since the bankruptcy case was dismissed on January 13th, the volume and buying interest started increasing, which caused it to move up and break outside of its 4-month trading range”
“The MJ sector is really hot right now, and this is one of the only tickers with a proven track record of performing extremely well in MJ manias that hasn’t really taken off yet”
“I can understand why that’s the case, but it looks like the market really likes its chances from here, as it’s clearly been gaining strength and momentum lately”
“If CNABQ takes out .03, there really isn’t any resistance until .15 and this stock has looked really explosive lately, so it looks like a pretty good time to get in”
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