Could marijuana penny stocks be making a rebound as a hot sector? Hot sectors can move the market … and create opportunities for traders.
As a trader, you probably already know that trends lead to incredible percent gainers. Just ask anyone who killed it trading crypto, shipping stocks, or AI stocks in their respective heyday.
Sometimes trends peak and fade. But sometimes they cycle back.
Marijuana penny stocks could be making a comeback. Ever since the first big run in 2015, they’ve been heating up and then cooling down.
In 2018 and 2019, there were a ton of opportunities with pot stocks, with plenty of in-play companies. But later in 2019, things cooled off dramatically.
But are marijuana stocks on the rise again? And do they deserve a spot on your watchlist now?
Let’s take a look at how the sector has evolved and how to potentially take advantage of opportunities coming up in 2020.
Table of Contents
- 1 What Are Marijuana Penny Stocks?
- 2 Are Marijuana Penny Stocks Worth It?
- 3 How to Buy Marijuana Penny Stocks
- 4 The Best Marijuana Penny Stocks to Watch
- 4.1 How to Find the Best Marijuana Stocks
- 5 Key Tips for Choosing the Best Penny Pot Stocks
- 6 Trading Challenge
- 7 Frequently Asked Questions About Marijuana Penny Stocks
- 8 The Bottom Line on Marijuana Penny Stocks
What Are Marijuana Penny Stocks?
I hope you already know what marijuana is … but if not, go ask your mom or dad. I’ll wait.
As for penny stocks, these are stocks that trade for $5 per share or less.
Combine the two, and you’ve got marijuana penny stocks. These are small companies with low-priced stocks operating in the legal weed sector.
Keep in mind, not all of these companies are directly related to weed. Sure, some marijuana penny stock companies are growing operations or directly related to retail dispensaries.
But they could also be peripheral businesses. For instance, companies that make protective containers for selling edibles, rolling paper manufacturers, distribution companies, and so on.
Why People Are Trading Marijuana Stocks
When a sector heats up and people take notice, it can create some crazy price moves. The legal marijuana industry is no different. It’s new, exciting. It’s kind of like a modern Gold Rush … And everyone wants in on the action.
But the same excitement that creates interest should also make you approach the sector with caution.
Marijuana penny stocks are still relatively new. They’re just as subject to the traditional penny stock schemes like pumps led by self-serving promoters.
This should make them very scary for newbies and amateurs. But for smart traders with the right skill set, opportunities abound.
The Growth of the Marijuana Market
The marijuana market has seen some serious booms. Legalization in Colorado, Washington, and Canada created huge booms in the market. As legalization continues and the tide turns, it will be a viable business model for not just more of the U.S. but also the whole world.
It’s a brave new world, and there’s plenty of opportunity. That’s why the sector’s been so hot. It’s also why so many upstart companies are trying to nab a piece of the pie … or in this case, the Alice B. Toklas brownie.
Think about how much legal alcohol is sold every day at liquor stores. The legal marijuana industry could equal or even surpass this industry. That can mean serious opportunities for traders.
The California Pot Stock Explosion
California residents may have a stoner reputation, but there’s nothing lazy about its thriving marijuana trade.
As of 2018, the state reportedly had the fifth-largest economy in the world. Some consider it the holy grail of weed markets.
Medical marijuana has been legal in California for years. And at the beginning of 2018, the state legalized recreational use as well. It’s basically as easy to buy weed as it is to purchase alcohol.
So you’ve got wealthy baby boomers reliving their Haight-Ashbury heyday … You’ve got tech and entertainment industry yuppies buying up edibles and weed vapes, and plenty of weed tourists coming to see green. The market is massive, to put it mildly.
The Country-Wide Potential in Canada For Pot Companies
In 2018, Canada made recreational pot completely legal. Not a province or two … the entire country. This was the first country to legalize it on a national level. That created huge market moves with companies in Canada and beyond.
The excitement moved stocks even in the U.S. and created crazy, thousand-percent gainers. Analysts talked about how the weed industry in Canada might result in million-dollar-plus sales.
But from where we sit now in 2020, it failed to live up to the hype.
That failure to thrive is due to a lot of reasons — supply issues, illegal activity, and restrictions and holdups by regulatory agencies. Huge backlogs have resulted in year-long waits for new companies to obtain grow licenses.
Growing pains, for sure. Pun intended.
Could we see green as the industry figures out the kinks? Can U.S. states leaning toward legalization watch, learn, and do better?
Are Marijuana Penny Stocks Worth It?
Two key things play into whether a sector is worth your time.
First, the sector needs to have massive growth potential. Are there stories making moves in the market? Are people excited about it?
Second, as a penny stock trader, you need to be able to find small companies poised to profit from the hot sector. You need the promise of a flood of frenzied traders who can push the prices up.
Marijuana penny stocks check both of these boxes, so I’d say probably. If you do your research and take the time to find a promising stock, they can very much be worth your time.
How to Buy Marijuana Penny Stocks
Ready to toke up — I mean start up — your laptop and get trading? Not so fast. Just because you could be trading weed stocks within minutes doesn’t mean you should.
Before you trade, make sure that you’re educated and prepared. You should actually have a trading plan. Here are some tips for moving forward intelligently…
The Best Marijuana Penny Stocks to Watch
Everyone wants hot stock picks. Well, sorry to disappoint, but honestly, the best way to do that is to create your own strong watchlist of potential stocks to trade.
Want to understand how I find stocks to trade? Get my FREE watchlist here. Note that this is a watchlist. For more on how you should use my watchlist to learn and understand my process, check out this post.
So … I could tell you that Aphria (APHA) had two profitable quarters in a row. And that a ton of people are looking at it…
Or I could tell you that people continue to watch losers like Aurora Cannabis (ACB) to see if it can turn around its dismal performance.
But here’s the thing with ‘hot tips’ … By the time you get the news, it can be out of date within days or minutes. Instead of looking for hot stock picks, become a self-sufficient trader and figure it out yourself!
Looking for a beginner’s guide to penny stocks? Check out my FREE penny stock guide here.
How to Find the Best Marijuana Stocks
So how do you start to find the best pot stocks?
First, I personally stick to short-term trading. These companies haven’t proven themselves. Most of these stocks have shown that they can’t hold their value over days, months, and years. Get in and get out with your profits.
Second, do your homework. Do you have StocksToTrade? If not, it’s time to be an adult and sign up for this amazing stock screener. People love to ask me how I find trades. I use this scanner every single day. It can help you scan for potential stocks to trade.
1. Decide Which Marijuana Stocks to Grab Right Now
Again … I can’t tell you what stocks you should buy right now. That’s your job. However, I can tell you a few things to look for.
You also want to look for high-volume penny pot stocks. If there are only 1,000 shares in play, there’s no reason to dive in. You might not be able to sell quickly, which means you can’t control your losses. No bueno.
2. Use Technical Analysis and Chart Patterns to Find the Best Opportunities
Before you make any trade, you should do a ton of research. The market is risky enough … do everything you can to stay safe!
When it comes to fast-moving penny stocks, it’s all about the charts. Base your trades on high-opportunity chart patterns, even if the stock has amazing fundamentals.
If you have even a basic understanding of technical analysis, you know that there are roughly a million chart patterns and indicators. It’s good to know what’s out there. But really, I prefer to use simple, clean chart patterns.
Don’t overthink it.
Look for clean price action. That could be a hot ticker making clean higher highs and higher lows every few days. Or it could be a stock with a recent exciting news story that’s just broken above its all-time high.
3. Fundamental Analysis for Penny Pot Stocks
Surprise, surprise: just as with most penny stocks, marijuana penny stocks usually don’t have strong fundamentals.
They’re usually small operations, led by managers trying to navigate an emerging industry. Even “good” companies will probably blow up.
Most penny stock movements are based on hype. Be on the right side of hype — understand that stocks almost never live up to it. That’s how you can learn to take advantage of penny stocks.
You can analyze a company’s fundamentals … but really you’re looking for anything that could move the stock. You want to find support for your technical analysis.
Make sure to keep up to date with news and company announcements regarding earnings, contracts, financing, and regulatory issues.
Be thorough and research everything you can. There’s a lot of information out there. But know the more you research, the better prepared you’ll be to ride the momentum when the timing is right.
4. Only Trade Hot Stocks and Be Ready to Grab Your Profits
There’s no use buying or shorting a stock that has exciting fundamentals. If nobody gives a damn about the company, the stock price won’t go anywhere. If nobody notices the stock, you can’t profit from it.
Make sure to only be in stocks that are currently hot. You want stocks people are talking about them. The company is in the news. The charts look clean and ready for big moves.
And don’t stick around for too long. Take the meat of the move. If you land a hot trade and make a healthy profit, get out. I can tell you from my 20+ years of experience … it’s better to be too early getting off the train than too late.
These crazy moves often end in major declines when the party’s over…
So, be nimble, ready to close your position, and walk away from the stock — and remember that hype doesn’t last forever.
And if the trade doesn’t go as you planned, get out. That’s rule #1: cut losses quickly.
5. Create a List of the Best Stocks
Your watchlist is a handy tool. Keep five or six stocks on your watchlist at all times so you can take immediate advantage of a potential win. Don’t know how to get started with a watchlist? Read this post.
I also recommend maintaining a trading journal. Track it all: your failures, successes, trade plans, entries, and exits. Go back and review often so you can spot your strengths and weaknesses. Avoid making the same mistakes twice.
Key Tips for Choosing the Best Penny Pot Stocks
So you’re set up with a broker … You’ve got your charting software and news feed on deck. What now? Here are a few more tips for finding great marijuana penny stocks…
1. Look for Unicorns
Look for stocks with a rainbow trail. Figuratively speaking.
In any booming market, you want stocks with buzz. Exciting news stories and rumors pop up regularly. Trading volume is picking up. These stocks are making clean higher highs and higher lows.
This excitement and price action can create a self-fulfilling prophecy. Everyone starts to jump on board. Journalists notice and start to write more stories. It’s all a recipe for the potential for huge price moves.
The important thing is to get on board right before the stock takes off on a massive run. But if you miss it, that’s OK. More plays will come along. Be proactive, but stay nimble.
2. Look for Pot Stocks Where Legalization Is New
When legalization was new in Colorado … and Washington … and Canada … pot stocks peaked.
The lesson? It’s not that you missed the boat. It’s that it could happen again.
When there’s a new area of legalization, it could make marijuana penny stocks pop. It could also mean sympathy plays.
So be sure to follow the news and any budding (get it?) legislation measures in the works. It could give you a clue to the hottest opportunities.
3. Build Your Pot Stock Portfolio
Yeah, stock research can be a chore. You gotta keep up with charts, news, SEC filings, and top percentage gainers and losers. But it’s absolutely crucial to finding the best opportunities.
In the old days, I’d click between 20 different websites, spreadsheets, and trading platforms just to keep up to date. Luckily those days are gone.
You can now use StocksToTrade to keep a watchlist of all your favorite stocks, filter for high-impact news stories, scan for new trades, and so much more.
It’s an all-in-one solution that I helped create a few years ago. It’s made our lives so much easier. Is it a coincidence that so many of the world’s best penny stock traders start their day with StocksToTrade? I don’t think so.
4. Master Your Trading Skills
It’s no secret that the vast majority of traders lose. Sad, but I’m not just telling you this to be a downer … There’s good news, too.
The small percentage of traders that do make a profit take all the money from the others. That’s what can make trading so damn lucrative. So if you can really learn the market, you’re already ahead of the game.
Separating yourself from the losers isn’t all that complicated. Seriously — I figured this out as a kid. I’d sneak out of class to research stocks while I was in high school and college.
If you’re dedicated and willing to put in the work, you can study and learn the patterns that move penny stocks. You can learn to take advantage of them.
It’s simple. But simple doesn’t necessarily mean easy.
You need a solid education. And you gotta study a ton and learn every day. In my life, this has paid off.* How about you … are you willing to put in the work?
I created my Trading Challenge to turn even absolute newbies into self-sufficient penny stock traders. I teach them everything I’ve learned in over two decades in the markets. Wins, losses, mistakes — I share it all with my students. And you can join us.
If you apply and you’re accepted to come and train with me, you don’t just get tons of video lessons, interactive webinars, and blog posts … You also get a real-life trading education.
Apart from my charities, the thing in life that really excites me is training my students and working to create my next batch of millionaires.* Want to be one of them? If you’re lazy, it’s not for you. But if you decide that you’re ready, apply for my Trading Challenge today.
Frequently Asked Questions About Marijuana Penny Stocks
What are Marijuana Penny Stocks?
Marijuana stocks are stocks of companies that sell cannabis based products. Penny stocks trade for less than $5 per share.
Are Marijuana Penny Stocks Worth it?
Most penny stock companies fail in the long-run, regardless of sector. As a trading vehicle, marijuana penny stocks can be worth it if you understand how (and when) to trade them.
How to Buy Marijuana Penny Stocks?
Marijuana penny stocks trade like any other penny stocks on the various exchanges. If you know the ticker symbol, you can buy or sell using your preferred trading platform. Do your due diligence and create a trading plan first.
The Bottom Line on Marijuana Penny Stocks
Marijuana penny stocks can provide opportunities for some wild moves. The industry is still emerging, and there’s still a possibility that the sector could deliver massive profits.
But like with any sector, you’ve gotta be on the right side of the hype. You always gotta be ready to close your position and hold on to your profits or cut your losses.
Research every stock you’re watching … and keep your charts, news feeds, and watchlists up to date constantly.
What do you think? Are marijuana penny stocks are worth it? Leave a comment and tell me your thoughts.