Buy the rumor, sell the news..not likely to last in MJ space Once traders understand how markets anticipate and react to major events, there are several common ways to trade them.
The first step in the adage is to buy the rumor. If a trader has a strong positive inclination that a major catalyst will benefit the specific market or stock (i.e. the Canadian Governemt removing a 95 year old ban on cannabis), the time to buy the stock is well before the announcement date (yesterdays Legalization). Assuming the thesis is correct, other buyers will also likely be buying the stock ahead of the annoucement/news release, driving the share price higher (which, for the most part, the majority of weed stocks have been plummetting since January). Ironically, traders who predict good news can often sell a stock for a large profit before the news even comes out as other traders pile into the stock.
After the positive news comes out, there could be a potential short opportunity or short attack. When a stock has been steadily climbing higher for weeks (which weed stocks have NOT been doing) ahead of a catalyst - like an legalization announcement, it is a clear sign that market expectations are extremely high. As a result, even good news will often be met with selling pressure and could drive the share price down.
In my opinion, recent downward pressure on SP is only temporary. Soon institutional investors will pile into the weed industry now that it's no longer considered a risky environment and is more closely aligned with Alcohol and Tobacco. I predict good price action and upwawrds momentum to pull most MJ plays upwards. GLTA