MJ Stocks Analysis

[nopancakemix]

Greens, It Has Little to Do With "Shorts"
Shorting doesn't kill a rally. In fact, shorting often exacerbates a rally as short nibbling follow by covering can add fuel to the fire. With penny stocks, shorting is far more difficult especially for the retail traders which make up most of the penny volume. In fact, it is the flippers, weak hands and day trading longs who dump into strength that cause the stocks to recede.

The rally was also killed because it was unsustainable without fundamental follow through. Don't get me wrong, the hype is far from unfounded, as evidenced by the longs lines outside shops in Colorado but that sort of excitement is short lived. Fortunately, markets don't trade on past performance, it is future potential that brings investment capital.

Yet, I don't think the fades will be similar to the previous years. In early 2013 when I created my iHub account, I warned that MJNA would likely fade throughout the year just as CBIS had done the year before. BUT in 2014, there are such drastic advancements that I believe we are on the precipice of a major movement. The marijuana trade is emerging from the recesses of a black market into a legal marketplace. Colorado is just the first step in the long journey to full federal legalization. Additionally, in 2014 the USA has mid-term elections where undoubtedly not only will marijuana legalization be addressed but many states will have medical and recreational initiatives on their ballots.

I'd expect some sideways/downward drifting for a few weeks until earnings. I am sure an excellent report from one of the sector leaders could renew the excitement and an ground-breaking PR could reinvigorate the sector. The folks on the ERBB board are looking for a press release about the company's long overdue vending machines. Should ERBB execute on this effort, the company could easily be valued around $2-5b depending on how many locations are secured in Colorado. If ERBBB/Tranzbyte can expand the machine nationwide, then a $20b market cap would be a conservative estimate, putting the equity around $10pps