The cannabis sector is experiencing a cautious rebound after a sharp post-election sell-off. The market reacted negatively to the return of Donald Trump to the presidency, a GOP-controlled Senate, and the failure of Amendment 3 in Florida, which aimed to legalize cannabis. This led to widespread panic selling, sending many cannabis stocks plummeting. However, as of Thursday, some stocks are showing signs of stabilization, suggesting that Wednesday’s declines may have been overblown.
Tilray Brands (TLRY): A Tentative Recovery
Tilray, which suffered a significant drop yesterday, trading down to $1.51, has recovered slightly to $1.56, marking a 1.3% gain. The Relative Strength Index (RSI) stands near 41.85, indicating that the stock is approaching oversold territory. This could attract buyers, but the stock’s movement remains tentative, with resistance around $1.60. The formation of a hammer pattern on the chart could signal potential final dip levels.
SNDL: Holding Support
SNDL is demonstrating resilience at the $2.00 support level, recovering slightly to $2.02 with a neutral RSI at 45.90. The stock has managed to absorb some of the selling pressure, though it remains below its recent high near $2.60. This suggests that traders may be taking a wait-and-see approach, seeking clearer signs of sustained support before fully re-entering the market.
Trulieve (TCNNF): Strong Bounce
Trulieve, which experienced a drastic drop yesterday following Florida’s failed cannabis legalization effort, is now up 6.53%, trading at $7.67. The RSI of 28.54 highlighted an oversold condition, attracting buyers looking for value. This recovery suggests the initial selling may have been excessive.
AdvisorShares Pure US Cannabis ETF (MSOS): ETF Stability
MSOS, a popular cannabis ETF, has risen by 4.83% to $5.21, rebounding from an RSI of 31.15, which flagged oversold conditions. With many cannabis stocks attempting recoveries, MSOS is holding above the $5.00 level, a critical support level.
Is Buying the Dip a Good Idea?
While the sector is showing early signs of stabilization, the underlying risks remain. The GOP-majority Senate is likely to stall cannabis reform, potentially leading to four more years of minimal legislative progress and limited regulatory changes. This could create a period of cannabis protectionism, with the industry facing continued challenges.
However, it’s important to consider the fundamentals of cannabis, which remain strong. The impact of rescheduling on balance sheets, due to the suppression of the 280E tax burden, would be significant for the industry. Notably, rescheduling does not require a Senate majority or presidential involvement. The upcoming DEA administrative hearing and ruling on rescheduling are crucial factors for cannabis stock prices.
Investors should carefully weigh the potential for long-term industry growth against the immediate political headwinds. While the market may be experiencing volatility, the fundamentals of cannabis remain strong, prompting some to consider buying the dip. With the right due diligence and a long-term perspective, investors may be able to capitalize on the potential growth of the cannabis industry, despite the current political climate.
