This essay was originally published in DailyWealth Trader, a daily trading advisory, and has been adapted. To learn more about this service, click here.
A Political Shocker Paves the Way for a Bull Run in This Sector By Chris Igou, analyst, DailyWealth Trader
The Democrats are getting ready to nominate the most pro-cannabis candidate in U.S. history... Last Sunday, President Joe Biden decided to pull out of the 2024 election. Now, the Democratic Party is rallying behind Vice President Kamala Harris. And Harris has shown strong support for decriminalizing marijuana at the federal level... As recently as March, Harris hosted a closed-door meeting with recipients of pardons for cannabis-related convictions. According to one attendee, Harris stated outright that "we need to legalize marijuana." This marks an important development in the White House's stance on cannabis. Earlier this year, Biden called for marijuana to be reclassified from a Schedule I drug to a Schedule III drug. (In other words, the law would treat possession like cough syrup rather than heroin.) The new scheduling will certainly lower the legal barriers to selling cannabis. But a Schedule I drug is a far cry from a fully legal substance like alcohol or tobacco... If Harris has her way, marijuana prohibition could end on a federal level. Recreational marijuana would then be available nationwide, instead of in only 24 states as it stands today. Simply put, America is closer than ever to legalizing cannabis. We're seeing a new surge of life in marijuana stocks as a result... and that's great news for one exchange-traded fund...
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America's Next Nightmare (Has Nothing to Do with November) Roosevelt failed to make it work during World War II. It failed again for Nixon in the '70s. Right now, our government is so desperate, they're pulling the same dangerous maneuver... and when it inevitably fails this time, it could tip America into an economic nightmare. It doesn't matter who the Democrats select as their nominee – Biden has already set this in motion. Full details here. | |
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The AdvisorShares Pure U.S. Cannabis Fund (MSOS) broadly tracks the cannabis sector. It gives investors pure-play exposure to the entire cannabis industry. We went long on MSOS in my DailyWealth Trader newsletter back in April. Here's what we said at the time... Stocks like Canopy Growth (CGC) and Aurora Cannabis (ACB) have roughly doubled in price in the past few months... That sounds like a massive move. But these speculative stocks can soar much higher during an election year like we are in right now. For example, take a look at what these two companies did back in 2016. Both soared hundreds of percent leading up to the November 2016 election... Aurora was up over 300% in 10 months. Canopy rose more than 215% over the same period. We saw a similar scenario pan out in 2020. This time, Canopy jumped 196% from its March 2020 bottom through November. And Aurora was up 205% from its October 2020 bottom through November. Cannabis reform was a major theme during the last two U.S. elections. And it drove big gains for cannabis investors in 2016 and 2020. Now, our MSOS investment hasn't performed as well as we hoped so far. We're currently down on the position. That said, we anticipated this volatility ahead of time. We encouraged subscribers to hold the position with an extra-wide stop as a result. But we knew that the 2024 election would likely heat up this broken-down sector. And with Harris now the likely Democratic nominee, that process appears to be starting... MSOS appears to be forming a bullish technical signal known as a "rounded bottom." This pattern frequently appears after long crashes in an asset. With no one left to sell the asset, bidders start trickling in to buy at a discount. The sloping downtrend flattens out into a bowl or "U" shape as sellers wash out of the asset. This forms the base for a reversal. The recovery often mirrors the crash in speed and intensity. Today, MSOS has formed a classic rounded bottom in a two-month time frame. Take a look... You can see the rounded bottom forming in the chart above. With the right side of the "U" already coming into focus, we see signs of a rebound in cannabis stocks on the horizon. But MSOS is also forming a rounded bottom in the longer term. Take a look... The long-term chart for MSOS echoes the bullish technical setup we see on the six-month chart. That means we also have the technical runway in place for a much bigger rally in marijuana-related stocks than anyone expects. So if you're looking for exposure in this space, now might be a good time to consider buying shares of MSOS. My bullish political thesis is still in play for marijuana stocks. And the recent shake-up in Democratic nominees should only add to future tailwinds. Good investing, Chris Igou Further Reading Footwear giant Nike recently fell into "oversold" levels based on one metric. But that's not a reason to panic. In fact, history shows similar situations have offered contrarian investors a great buying opportunity... Learn more here. Some folks are already throwing in the towel on the latest small-cap rally. But according to history, we shouldn't write this move off just yet. This group of stocks could generate double-digit returns over the next year... Read more here. |
Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK AbbVie (ABBV)... pharmaceuticals Thermo Fisher Scientific (TMO)... life sciences Arthur J. Gallagher (AJG)... insurance Hartford Financial Services (HIG)... insurance TransUnion (TRU)... credit reports Infosys (INFY)... IT consulting Garmin (GRMN)... GPS technology Gildan Activewear (GIL)... apparel Unilever (UL)... household goods Coca-Cola (KO)... soft drinks British American Tobacco (BTI)... nicotine products CBRE Group... real estate services D.R. Horton (DHI)... homebuilder KB Home (KBH)... homebuilder 3M (MMM)... manufacturing United Rentals (URI)... equipment rentals CorVel (CRVL)... risk-management solutions Lockheed Martin (LMT)... aerospace and defense Heico (HEI)... aerospace and defense Seadrill (SDRL)... offshore drilling NEW LOWS OF NOTE LAST WEEK Las Vegas Sands (LVS)... casinos and resorts Wynn Resorts (WYNN)... casinos and resorts Five Below (FIVE)... discount retail Ulta Beauty (ULTA)... cosmetics Stellantis (STLA)... automaker DexCom (DXCM)... medical devices
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