Today, cannabis stocks are once again making their way onto investor watch lists ahead of what could be crucial legislation to come. As a result, the actions of Aurora Cannabis (NASDAQ:ACB), Tilray (NASDAQ:TLRY), Sundial producers (NASDAQ:SNDL) and canopy growth (NASDAQ:GCC) all rose this morning, before giving up much of their gains in the early afternoon.
This morning’s price action appears to be a continuation of a strong strengthening of bullish sentiment in this sector. After legalization north and south of the border, cannabis stock investors have been patiently waiting for positive movement on the legislative front in the United States. So far, it appears that President Joe Biden’s administration has been less welcoming to the idea of cannabis legalization than initially thought. As a result, this sector has sold off since his election, when interest piqued again in this sector.
Today, investors are trying to assess the likelihood of passage of the MORE law. Let’s dive into what investors are looking at with this federal legalization bill.
What is driving the volatility in cannabis stocks today?
This morning’s price action seems to suggest that there remains a strong contingent of investors optimistic about the potential for federal legalization of cannabis in the United States. sector.
That said, speculators have been disappointed with this growing sector for some time. There are several reasons for this. The anticipated growth rates factored into these stocks in 2017 and 2018 were unrealistic. Indeed, the legalization movement outside of a few smaller markets has left investors in a precarious position.
That said, the potential for the MORE Act to pass could be a game changer. If this bill passes, cannabis companies may finally be able to capitalize on sales across state lines.
An affirmative vote by the House on Friday could pave the way for the bill to pass. Unfortunately, expected opposition from the US Senate may leave this DOA bill. As a result, this afternoon’s price action appears to reflect investor fears that this bill will stagnate late in the day.
Cannabis stocks may be among the most volatile stocks in the market right now. For some investors and traders, this is a good thing. For most long-term investors, it’s really hard to gauge what the outcome of this Aat will be. Thus, I am watching this price action comfortably from the sidelines right now.
As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.