What goes up?
With the market at the highs, like we talked about in the newsletter recently, my primary consideration has been short squeezes. This is because these tickers provide quick opportunity, oftentimes overnight, and typically on a large scale.
Last week, we talked about tickers like BYND and AMD.
This week, we’ve had several other opportunities, particularly in the weed stocks.
Here’s why you should consider looking at them…
Now, hate them or love them — marijuana companies are in a hot, growing industry group, and with moves towards either decriminalization or legalization across the country, this is a group that continues to grow.
Of course, due to the fact that these are companies making money off of selling a once illegal product (that’s still illegal in many places) it’s going to be a polarizing issue.
I hate to compare it to Beyond Meat, and their meatless patties. However, in a way it’s similar. Due to the much criticized, debated, and love vs. hate relationship people have with this product, it’s mirrored in the stock chart.
You have to remember that stock charts are literally emotions written on a screen, in terms of price. These emotions create patterns.
Because of the divisive nature of companies like Beyond Meat (BYND) and the weed companies – like Canopy Growth Corporation (CGC) and Tilray (TLRY), they’re going to be incredibly volatile.
Remember when cryptocurrency took off? This is similar as well.
While these issues can be debated, I’m much more concerned about trading them.
Plus, how that overall emotion impacts my trades — and potential profits and losses. Because these companies elicit such strong opinions from consumers and traders alike, the tickers will move on a day to day basis upwards of 5-10% and sometimes even 15%. These moves are extraordinary in the stock market, as companies like Microsoft (one of the strongest out there) will typically move at the max around 2-2.5% on a great day. Now there are outlier days where I’ve seen it move as much as 3-4% — but this is unusual.
Also because they’re so highly debated, they have a ton of traders shorting them — and betting on their failure.
It’s this emotion that causes tickers to gain over 60% in a week, like BYND:
It’s also what allows me to get gains like this:
So — we can all make jokes about ‘how the pot stocks are smoking’ and debate the legalization — but we’re traders, and what I care about and what I look for, are high probability moments in time.
And, a highly publicized, debated ticker like CGC provides the exact opportunity for us, as traders. High short interest, highly covered in the news, and tons of volume.
This is what a short squeeze is all about.