Whats the worst that can happen with marijuana stocks
It seems like there is a lot of panic in the air. You can feel it in peoples moods and reactions. Marijuana stocks have been on the rise since September. We have gotten our first real taste of a pull back. To add to the fear, is the constant predictions of an overall stock market crash. If the market crashes, these speculative stocks will most likely crash even harder. Have to ignore the fear.
Look at the run up from July to November 2016, the index went from 80 to 300. The market dipped back down and eventually found a baseline which is a lot higher than the 80s. The sector even peaked again in April with news of the regulations and tax rates coming out.
Why do I refer to this previous run up. Most likely history will repeat its self to a certain extent.
We have had a huge run in the marijuana stock sector. Back when the run started, I looked at the past run going from 80 to 300, I figured we might see a run from 200 to 600. Turned out we ran all the way up to 1000. In hindsight, yes I should have sold at the crazy highs, but as I’ve said before, I cannot time the peak.
Right now we are in a free fall, people are panic selling. The higher the run up the lower the dip will go. For people who bought in at the peak, this can be a very scary time, seeing their initial investment drop like a rock.
What is the worst that can happen
The fear in investing is mostly due to the unknown and the lack of control. It’s great seeing your money go up in value, but when the market turns, its hard not to fear the worst.
The worst possible scenario would be the marijuana stocks crashing to 0, maybe its caused by an overall market crash or the bubble bursting in the marijuana sector. The chances of this actually happening are most likely pretty low.
If you are invested in real companies like WEED, ACB, MJN, APH, the stocks are not going to 0. Sure they might decline a lot but will not crash to 0.
Whats more likely to happen
Taking into account past experiences, it is likely the marijuana stocks will find a new baseline. I have no clue where this baseline will form. The chances of the index reaching July 2016 levels are most likely pretty slim. I’m assuming the sector could find support between 400-600. Time will tell where it ends up.
The last surge in sector, it took about a year to reach the previous highs. The huge run up can test our patience, being tempted with massive profits so quickly. If we had cashed out near the peak, we could be way ahead of the game, not having to wait years for the stocks to go back up to previous highs.
The recent run in prices were larger than last November, while it only took 1 year to reach those highs, this time it could take a lot longer. If you have a long term mindset it shouldn’t bother you. I wasn’t expecting to get rich quick, even though it does seem to be happening quicker than normal.
The industry is continuing to mature, as time goes by there will be ups and downs. I’m trying to get better at taking more profits while we are on the up trends. While this reversal is hard to watch, it was expected, there is no way stocks can go up 4x without pulling back.
These are just my thoughts on how this correction will play out, helping me to hold my positions for the long term.