Are cannabis stocks set to pop?

There are differing opinions about the timing of the seemingly inevitable regulatory changes that are holding them back in the US, but are cannabis stocks set to rebound anyway?

In a research report to clients October 21, Beacon analyst Russell Stanley noted that there are “signs of life” in the sector, from a technical perspective.

“Given the recent improvement in performance, we have revisited the technical perspectives for our coverage universe,” the analyst wrote. “12 of 17 issuers posted positive returns last week, including 3 stocks that climbed 10%+ (HITI, CBST, TSND).

Overall momentum is now positive, with 11 of 17 issuers showing RSIs of 50+, including 4 with strongly positive momentum (RSI 60+, HITI, TRUL, CURA, and AYR),” Stanley added.

“We continue to view the actively managed ETF (MSOS-NYSE, Not Rated) as the single best barometer for the space,” the analyst wrote. “MSOS climbed 5% last week, and as shown on page 2, the ETF has broken the downtrend that began in early May, established a tentative, new uptrend, and broken its 50-day MA. Two major MSOs (CURA, GTII) and AYR have recently broken their primary downtrends and their 50-day MA. VRNO and VFF are both testing their primary downtrends.

The analyst noted some names he is watching closely right now.

“TRUL continues to be a favourite, as it is still in the uptrend it began in August 2023. There may be some turbulence around C$18.50, but it otherwise looks poised for a run at its 52-week high of C$20 set in early May. GRIN, a prior favourite, is now in an important, simultaneous test of its primary uptrend and 50-day MA. This could be a great (re)entry point, though we note that its momentum has recently turned negative. HITI (page 10) is now testing its 52-week highs, though its RSI is now at 52-week highs, so it may be due for a breather. Finally, CURA may have significant open field without resistance if it can conclusively break the September high just under C$4.35/sh.”