Hot Medical Marijuana Stocks and What Traders Can Look Forward to In 2019

It’s high time to talk medical marijuana stocks, one of the hottest sectors so far in 2019 …

The conditions are just right for medical weed stocks to explode. We’re talking huge catalysts, like the Farm Bill passing, which will likely lead to CBD moving to much larger markets.

There’s also Canada’s recent legalization of marijuana. And more and more U.S. states are approving it medically, recreationally, or both.

That means there are a lot of emerging companies gaining huge traction in the market.

As a trader, how can you intelligently approach this trending sector? What stocks should you be looking at? What should you expect from medical marijuana stocks in the year ahead?

In this post, I’ll dig into what’s happening right now with medical marijuana stocks, including how to locate stocks to trade and what I’m looking forward to in this sector in 2019.

Download the key points of this post as a PDF

What Are Medical Marijuana Stocks?

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There’s a lot of misunderstanding about marijuana stocks, so let’s clear the air. What are pot stocks, and how can you identify them?

To understand medical marijuana stocks, you need to pause and understand what medical marijuana is first.

Medical marijuana is marijuana that’s specifically used to treat medical conditions or diseases.

Marijuana is made up of a slew of different chemicals. And there are two key chemicals that are used medicinally: THC (short for Delta-9-tetrahydrocannabinol) and CBD (short for cannabidiol).

Harold and Kumar fans will recognize THC as the component that induces the high feeling that pot is so famous for.

CBD, on the other hand, is becoming more popular. It has the same medicinal qualities but lacks the psychoactive effects.

Believe it or not, marijuana wasn’t just discovered in the 1960s. It’s been around for centuries. From the 1850s to 1940s, it was even listed in the US Pharmacopeia (also called the USP) as an acceptable medical product.

Marijuana was regularly prescribed for illnesses ranging from gout to migraines to … yep, even intestinal worms in the 1800s and early 1900s.

But in the 1930s there was a big campaign to make medical cannabis illegal. It was successful, and cannabis wasn’t a huge part of the public eye again — until hippies discovered it as the ultimate party starter.

That’s been changing in recent years … the benefits of medical marijuana are newly re-discovered and touted for helping to alleviate symptoms from cancer, glaucoma, and more.

Medical Versus Recreational Marijuana

Not all marijuana use involves queuing up “Bill & Ted’s Excellent Adventure” and breaking out the Doritos. Here are some of the key differences between medical and recreational marijuana:

  • You need a doctor’s note. To get medical marijuana, you need a recommendation from a doctor. With this recommendation — which needs to be updated periodically — you can go to an approved dispensary and purchase product.
  • The product may be different. Sometimes, medical marijuana has less THC than recreational marijuana, since the goal isn’t necessarily to get high. Often, it has a higher level of CBD than recreational marijuana.
  • Medical marijuana is available in more places. Recreational marijuana is approved and legalized in 10 U.S. states (plus Washington D.C.). But at this point, it’s still less common than medical marijuana, which is available in 23 states.

So, now that you know medical marijuana a little better, what are medical marijuana stocks?

These stocks pertain to the industry of medical marijuana and might include:

  • Marijuana growers: This is one of the most straightforward types of marijuana stocks, offered by growing operations.
  • Marijuana distributors: These are the companies responsible for transporting the product from growers to warehousing and dispensaries.
  • Marijuana dispensaries: Sometimes growers also offer products at a retail level, but sometimes they sell wholesale to dispensaries. This is where people go to purchase medical marijuana. Such establishments may offer stock.
  • Medical stocks: Pharma companies are getting hip to the medical marijuana trend. These stocks would be offered by companies developing drugs with CBD or medical marijuana.

Related products: To grow marijuana, you need supplies. This means that companies offering hydroponic products, fertilizer, and lighting systems can be considered part of the medical marijuana industry.

The Rise of Medical Marijuana Stocks

Medical marijuana stocks are on the rise. There are a few key recent catalysts, including …

  • Increased interest in holistic healing. Recent years have seen a huge increased interest in holistic medical alternatives. Medical marijuana is a big part of this. People are increasingly digging the healing properties of cannabis, and there’s potential for medical marijuana to branch out — not just into the retail sector but into big pharma and biotech as well.
  • Legalization in Canada. As of late 2018, marijuana is completely legalized in Canada. Following the legalization, pot stocks enjoyed a huge surge in popularity. Many see the writing on the wall that it’s only a matter of time until the U.S. follows suit.

Prospectors are investing in all kinds of marijuana and related stocks. With a lot of states approving recreational marijuana, there’s increased interest in all pot-related stocks. The confusion around what’s approved and where makes it tricky, though …

  • The Farm Bill. What does farming have to do with medical marijuana stocks? A lot! The recently passed Farm Bill includes a proposal to fully legalize the production of industrial hemp, a common source of CBD.

Prior to this, CBD lived in kind of a legal grey area. It wasn’t illegal, but it wasn’t exactly legal either. It was mainly available on a smaller scale — you wouldn’t see it in CVS, for instance.

Now that the bill has passed, it likely won’t be long before CBD is available to a much larger audience and produced in much larger quantities.

This means that CBD-infused everything — from medications to beverages — may be on the store shelves in the not-too-distant future. That could have a big effect on stock prices.

What Traders Can Look Forward to Medical Marijuana Stock Market in 2019

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The Farm Bill will likely have a huge effect on CBD production in the U.S.

You can expect to see a lot of activity from companies and products related to this sector …

There’s still that legal grey area around marijuana, and that’s led to a lot of interest in companies in the medical marijuana sector. Traders are waiting and watching to see what happens next.

So far — based on speculation alone — many companies are experiencing bigtime growth in short periods. So, for instance, it’s not unusual for a stock to gain 30% or more in a day.

More and more states are greenlighting medical marijuana, which will increase the production of products and services related to these stocks.

Right now, most medical marijuana stocks are based in Canada and found on exchanges like the OTC market.

But now that CBD production will likely increase stateside, you’ll probably see more companies emerging on the major exchanges.

In short: There’s still a lot of uncertainty in the medical marijuana stock sector, but this can add up to great opportunities for traders.

How I’d Trade Medical Marijuana Stocks in 2019

So, by now you probably realize that this sector is worth watching.

But how do you buy cannabis stocks? It’s not always as simple as making a selection and executing a market order

Here are tips to help you make the most intelligent trades:

#1 Stock Screener

Hands down, the best way to find potential medical marijuana stocks to invest in is by using a stock screener.

A stock screener is a platform where you can filter stocks by criteria that you set up. It’s the first step in creating a strong watchlist, which should be the basis of all of your trades.

My favorite is StocksToTrade. It has the best tools and allows you to execute trades right from the platform.

For example, you might start by filtering on the top gainers for the day, then filter by volume and float. Within that list, especially these days, you’ll probably see a few medical marijuana stocks.

You can use various methods filter down from there (here’s how to make the most of a stock screener).

#2 News Catalysts

What is a catalyst? That’s easy. Basically, it’s any company news that could affect the price of a particular stock. Some news catalysts might include:

  • Earnings reports: Soon after the end of each quarter, public companies are obligated to release a quarterly earnings report. They have a limited time period in which they need to release them: That’s called earnings season.

A lot can happen to a stock’s price based on the earnings reports. If the company performs higher than anticipated, it can drive up the stock price. Sometimes it’s short lived. Sometimes it lasts longer.

But if the company doesn’t meet earnings expectations, it can have the opposite effect and bring the security price down. By staying on top of the release dates you can better position yourself for successful trades.

  • Big contracts: This is particularly relevant with medical marijuana stocks right now as seemingly everyone wants to get in on the action …
    An example might be a big company, such as Coca-Cola, looking into a CBD producer for a potential partnership to create a CBD-infused beverage. A contract like this could really move stock prices — so stay on top of the news!
  • Notable new hires: A change in personnel can affect a company’s stock price. If a beloved and high-performing CEO steps down, the uncertainty of what will happen next could bring the stock price down.
    On the other hand, look at a company that has poor earnings. If they decide to sack their CFO and find a hotshot replacement, that could have a positive effect on the stock price.
  • Policy changes: Sometimes, policy changes or regulation can affect the stock price. Medical marijuana stocks are a perfect example right now. The recent CBD policy changes could help stock gain bigtime in the coming weeks and months.

#3 Patterns and Indicators

For the most effective research, a good trader typically relies on a mix of fundamental analysis and technical analysis.

Fundamental analysis covers news catalysts, earnings reports, and an in-depth look at the company overall.

Technical analysis is all about the charts. And as my Trading Challenge students know, I’m all about charts.

Even if a stock has amazing fundamentals, you must back it up with the price action on the chart.

I like to look for clean, easily identifiable patterns in stocks. I don’t like surprises, so I try to find charts that follow what looks to be a reliable and easy-to-follow trajectory.

When a chart is clean, then so is my mind as I enter a trade. While history never repeats itself exactly, it’s usually pretty close. Close enough — at least I hope — to help me profit.**

Nobody can be right all of the time, but this method has helped me be right enough of the time. My win rate (check it out on, where I document each and every trade) is about 70%.**

I like to look for tickers that are making very clean highs and higher lows for several days in a row or a stock that’s exploding after a big news catalyst.

#4 Volume and Volatility

Before you learn how to invest in marijuana penny stocks, you’ve got to have a good understanding of volume and volatility.

In general, penny stocks will be more volatile than higher-priced stocks. That’s because the companies are typically smaller, less established. They’re generally not as reliable as large-cap companies.

This is particularly important for marijuana penny stocks because they have a double whammy of volatility.

Not only are low priced marijuana stocks subject to the same volatility as most low-priced stocks, but they’re also in an emerging sector that hasn’t been proven yet.

Lots of volatility can mean the potential for profit — but it can also mean the potential for big losses.

This volatility is in part why it’s so important to look at the volume around a given stock. A good volume (I’d throw out at least 1 million shares daily as a good starting point) can be a good indication that there are buyers and sellers actively trading this stock.

This means there’s good liquidity. It increases the likelihood of an easy entry and exit from a position if you choose to trade.

If there’s not enough volume, be wary! It could mean you won’t be able to exit your position when you want. And nobody likes being stuck in a trade.

Key Tips to Trade Medical Marijuana Stocks

Establish Your Budget

So how much of your account are you willing to put on the line when investing in medical marijuana?

Part of improving your chances of successful trades is having a plan in place. Part of that plan is deciding how much you’re willing to invest in a particular stock.

There’s no definitive answer here. It depends on multiple factors — the size of your account, your risk tolerance, and how good you think the setup is.

My advice: Study hard before you put any of your account on the line.

Research the Company You’re Considering to Invest

When considering marijuana companies to invest in, you gotta do the research.

Medical marijuana stocks are hot now and offer the potential for great returns …

Then again, they don’t have a proven track record. They’re volatile, so losses could mount quickly.

How do you know if the stock you’ve chosen is a good pick? Research, research, research.

Solid fundamental and technical analysis will help you out here. Get an idea of what the company is, what they do, the buzz around them, and their earnings.

A lot of these companies are growing fast, so read up on their financials and what people are saying about them.

Then, back it up by looking at their chart and checking out the action around the stock. If it looks too good to be true, it probably is.

Understand the Risks of Investing in Medical Marijuana Stocks

There’s a lot of risk involved in trading medical marijuana stocks.

Legal ambiguity, lack of clear regulations, and constantly changing laws — there’s just so much uncertainty.

If you want to trade these stocks, you need to understand the risks involved, including:

  • Hard-to-value stocks. The valuation can be determined by comparing a stock’s price to the company’s earnings, as well as cash flow and overall revenue.

Some marijuana stocks have increased in price so fast that it’s hard to get an accurate read on the growth potential for the stock.

Also, some newer companies aren’t profitable yet or are too new to really show historical data.

That means most people are looking at growth projections rather than the cold, hard facts of history.

It can be hard to determine if a price is appropriate — especially since no one really knows what the future legal forecast holds.

  • Not all companies will succeed. Medical marijuana stocks are trending, and plenty of people are jumping on the bandwagon with weed-related startups. Trouble is, with such a glut of supply, the demand will eventually decrease, and some companies are bound to fail. And if you’re holding stock in one of the failing companies, you could lose big (unless you’re selling short).
  • Potential dilution. As the medical marijuana sector heats up, lots of companies are eying expansion.
    But if they don’t have enough capital, they may issue additional shares to build up capital. The value of the existing shares will drop — now there’s a higher number of outstanding shares. Dilution is a real risk for marijuana stocks because the legal grey area prevents some companies from borrowing from banks. And they might resort to creative ways to raise cash.
  • Risk of commoditization. Marijuana is grown, which classifies it as agricultural. Here’s the thing: Agricultural items are considered commodities.

Commodities are a classification of securities that includes raw materials and items ranging from metals, like gold, to resources, like oil. Basically, they’re items that are inherently the same between different companies, with price being the only real point of difference.

Commoditization can lower the price point because companies must adhere to industry standards to a certain degree to maintain even demand.

This isn’t a big problem right now, because the demand for medical marijuana is very high. But as legalization continues to sweep through the states and more producers get in on the action, that could change.

Enroll Yourself in the Trading Challenge

I could talk about medical marijuana stocks all day, offering tips, tricks, and insight …

But you won’t really make much of any of it without a proper trading education.

In my Trading Challenge, my goal is pretty simple: I want to teach you how to think for yourself as a trader.

I want you to be able to formulate your own game plan when hot sectors like medical marijuana stocks pop up.

Before you can do that, you have to start with the basics. In the Challenge, I teach my students the exactly that, from penny stocks to advanced charting techniques.

But it’s not just me talking on videos and in webinars. I also invite you to start trading.

You put your knowledge to work as soon as possible. You learn how to apply the lessons to the market.

I purposefully trade with a small account so I can be on the same level as my students. And as I teach, I trade right along with you.

This allows me to tailor my teachings to what’s happening in the market, as it’s happening.

If you’re ready to learn the rules of trading, build a strong foundation for trading, and be part of a great community, consider joining my Trading Challenge.

The Bottom Line

Medical marijuana stocks are undoubtedly one of the hottest sectors so far in 2019.

The legal landscape for marijuana and CBD in the U.S. is changing, and plenty of stocks are making big moves.

You gotta watch out: The volatility in this market can be dangerous …

But it can also provide opportunities for traders who are willing to do the research. And it can work for traders who have the risk tolerance to handle this action-packed sector.

These stocks are kind of like the wild west, so watch yourself. Make sure you’re not gambling or getting in over your head.

Ultimately, the same principles hold true for these stocks as for any other stocks: You need to do your homework. Be sure to make a watchlist, do your research, and always cut losses quickly.

Do you trade medical marijuana stocks? If so, do you have anything to add? Leave a comment!