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Why Tilray, Curaleaf, Canopy Growth And Other Cannabis Stocks Are Rallying Today

April 27, 2020 11:58 am
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Big cannabis stocks are rallying on Monday, with many posting double-digits gains.

So what’s going on?

Alan Brochstein, author of the 420 Investor and founder of New Cannabis Ventures, said the move "seems driven by Canadian LPs, and some of that may be short-covering."

If what we're seeing is short covering, he said the move is broad and spans across the market, as volumes are showing considerable upticks.

"I would note that small-caps in the U.S. are breaking to recent highs, and perhaps there is in general a stronger appetite for risk by investors," Brochstein told Benzinga.

Among the top gainers at time of writing:

  • Greenlane Holdings Inc (NASDAQ:GNLN) up 23%
  • Acreage Holdings Inc (OTC:ACRGF) up 19%
  • Medmen Enterprises Inc (OTC:MMNFF) up 12.8%
  • Tilray Inc (NASDAQ:TLRY) up 12.4%
  • Canopy Growth (NYSE:CGC) up 10%
  • Hexo Corp (NYSE:HEXO) up 10.9%
  • Aphria Inc (NYSE:APHA) up 8.2%
  • Cronos Group Inc (NASDAQ:CRON) up 6.7%
  • Curaleaf Holdings Inc (OTC:CURLF) up 6.7%
  • Aurora Cannabis Inc (NYSE:ACB) up 6%

Short-Covering

Matt Markiewicz, Managing Director of Innovation Shares, currently in charge of the firm’s cannabis ETF, seems to agree with Brochstein: short-covering looks like the main driver behind the rally right now.

“With no fundamental news driving the space today, it smells like a classic short-cover rally especially in the blue chip LPs,” he told Benzinga.

To illustrate his point, Markiewicz brought up one of the most popular cannabis shorts: Tilray. The stock has 22% of its float short right now; this is pretty high compared to other Canadian LPs such as Canopy, at 18%, and Organigram at 8%.

“With nearly 17 million shares short right now, Tilray’s short interest is up over 50% in a month. These types of sharp moves, like we've seen in the first half hour today, have really forced short sellers’ hands early in the trading session,” he explained.

“On the whole though, there is a general bid for risk and small cap equities in the market today and cannabis leveraged names are along for the ride.”

This price action is also giving a boost to cannabis ETFs:

  • The ETFMG Alternative Harvest ETF (NYSE:MJ) up 4.75%.
  • The AdvisorShares Pure Cannabis ETF (NYSE:YOLO) up 4.74%.
  • The Cannabis ETF (NYSE:THCX) up 5.38%.
  • The Amplify Seymour Cannabis ETF (NYSE:CNBS) up 5.44%.

'No Good Reason'

Unlike his peers above, Dan Ahrens, a Managing Director and the Chief Operating Officer of AdvisorShares, thinks "there's no good reason a stock like Tilray or HEXO or Cronos should be up like this."

On the other hand, he noted a stock like Trulieve (OTC:TCNNF) "should be way up with Florida setting record sales. But not Tilray or HEXO.

"I think it's at least miss-placed optimism. Maybe even an actual short squeeze. People reading about dispensaries being essential, and big sales increases, then buying up just the known, heavily-traded cannabis names like Tilray," he concluded.

Lead image by Ilona Szentivanyi. Copyright: Benzinga.

Versión en Español en El Planteo: Por qué Están Subiendo las Acciones de Cannabis Hoy: Tilray, Canopy Growth, Aurora, Curaleaf y Más


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