The state of Colorado has legalized marijuana for recreational use. Is there money to be made trading marijuana stocks? Technical analysis of these stocks may be difficult because of small trading volume. But, if other states adopt similar laws, trading marijuana stocks could be profitable to get in before stocks surge and get out before they level off. So, before we look at trading marijuana stocks let us look at the law in Colorado.
Colorado Law Regarding Marijuana Use
Colorado has two sets of laws regarding marijuana. These have to do with recreational use and medical use.
Colorado Amendment 64 says that
adults aged twenty-one or older can grow up to three immature and three mature cannabis plants privately in a locked space, legally possess all cannabis from the plants they grow (as long as it stays where it was grown), legally possess up to one ounce of cannabis while traveling, and give as a gift up to one ounce to other citizens 21 years of age or older. Consumption is permitted in a manner similar to alcohol, with equivalent offenses proscribed for driving. Public consumption remains illegal. Amendment 64 also provides for licensing of cultivation facilities, product manufacturing facilities, testing facilities, and retail stores.
This law allows for sales of marijuana for recreational use, taxation of profits from these facilities, and various ordinances relating to such establishments. It is the potential for profit from recreational use of marijuana that is of primary interest in trading marijuana stocks.
Medical Use of Marijuana
Colorado Amendment 20 allows for the use of marijuana in the state for approved patients with written medical consent. Patients may possess up to 2 ounces of medicinal cannabis and may cultivate no more than six cannabis plants (no more than three of these mature flowering plants at a time). Conditions recognized for medical cannabis in Colorado include: cachexia; cancer; chronic pain; chronic nervous system disorders; epilepsy and other disorders characterized by seizures; glaucoma; HIV or AIDS; multiple sclerosis and other disorders characterized by muscle spasticity; and nausea. Colorado medical cannabis patients cannot fill prescriptions at a pharmacy because under federal law, cannabis is classified as a schedule I drug. Instead, patients may get medicine from a recognized caregiver or a non-state-affiliated club or organization, usually called a dispensary.
Trading Marijuana Stocks
When considering how to trade stocks in this new arena, one should always consider the adage from the California gold field days of the mid-19th century. There is often more money to be made selling picks and shovels than in digging for gold. There are those who will be growing marijuana, those who will be selling it or potting plants or seeds, and there are those who will be providing the infrastructure needed to sell marijuana. Here are a few examples of folks who may make money in the world of recreation and medical marijuana:
- GreenGro Technologies sells growing systems and equipment to marijuana farmers. Its stock went up fifty percent of late
- GW Pharmaceuticals deals with medicines derived from marijuana. Its stock rose a few percent at best.
- Hemp, Inc grows industrial hemp and sells hemp seeds as food went up fifty percent.
- MedBox makes high-security storage and dispensing machines for controlled medicines. Its stock rose by fifty percent.
- MediSwipe Inc sells financial processing systems to the medical industry. Its share price recently climbed by about 70%.
- Two California firms dealing with marijuana for medical use rose in price,Medical Marijuana Inc. and Cannabis Science.
The potential size of the market is probably in the tens of billions of dollars albeit illegal at the current time. The estimated size of the legal market in the USA is a billion and a half and expected to hit two and half billion dollars a year with use by marijuana tourists and users coming in out of the shadows. This includes medical use, primarily in California. When trading marijuana stocks remember that these are small companies and many are penny stocks. Data for trading may be scare or lacking. They are prone to being pumped and dumped by initial investors. This may be an arena in which you will need on site experience and will need to pay close attention to daily detail. As always do not be afraid to sit on the sidelines if trading marijuana stocks makes no sense to you.