What caused the rally in November 2017
In looking at where we are today, we need to understand how we ended up here.
Looking at the charts on these big players including ACB (#1 in volume), WEED (#1 overall) and APH (#1 in inventory heading into legalization), I was looking at the catalysts.
Specifically
1. What caused the recent bull run starting the first week of November 2017
2. What cause the recent bear attack starting the last week of January 2018
THE BULL RUN OF NOVEMBER 2017
In looking at all the press releases, charts and so forth, it's clear. Heavyweight Alcohol company Constellation Brands buying into Canopy WEED.TO was the catalyst. Volume increased on all of these and mergers started. ACB acquiring CMED and, just recently APH acquiring NUU.
THE BEAR ATTACK OF JANUARY 2018
What cause the bear attack? Two things. Overvaluation and overbought conditions. Across the entire sector, stocks were grossly overbought and people were questioning valuations. Valuations are difficult in this sector because recreational canabis is not legal. Only medical MJ is. So everyone has problems.
The overall market correction of January 2018. If you look at the S&P, DOW, TSX and all market, they needed to consolidate. A sustained bull run is not sustainatble without consolidation. That's what we have.
Combine the wider market consolidation timing with the sector consolidation timing and that''s why we have this crash. Look back on this forum, traders were warning that overbought conditions were very scary. The perfect storm and we might not be over.
It doesn't matter what people post here. Don't fool yourself and others listening. The technical analysts can see it. The charts are very, very bearish. A few traders, called contrarians, will try to exploit the oversold short term conditions. Other traders are saying "sell now and buy cheaper" and they migtht be right. Looking at some technical indicators, it appears the pain is far from over.
But any credible technical analyst will tell you there are hundreds of ways to look at charts.
What's most important here is determining your own trading style. Are you short term or long term? If long term, appreciate that short term traders might have an advantage. They can buy and sell equities without thinking twice. They pay the lowest commissions rates, have access to the best tools. And unfortunately, the less ethical ones also play on long term investor's emotion.
During a downturn, they exploit fear. During a run, they exploit greed.
Right now, it's hunting season by predators.
Understand for yourself why we are here. And ground yourself with facts, not emotions and be ready for turmoil. If there is one thing you can be sure in a sector as speculative as this one, this is not the end of volatility, it's the beginning.