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Weed Theme in the US Adding Momentum To Marijuana Stocks

Reefer madness in the stock market.

Lucifer Morningstar

The FDA has recently approved the initiation of IGC's cannabinoid trial on Alzheimer’s patients.

India Globalization Capital announced on July 30th that they received authorization from the FDA to initiate a phase 1 human clinical trial for the company’s investigational cannabinoid formulation for the treatment of patients suffering from mild to severe dementia due to Alzheimer’s disease. Once the administrative tasks are complete, the company expects to begin enrolling patients suffering from dementia for a 12-subject safety Multiple Ascending Dose (study). The company thinks this FDA approval of the initiation is a huge next step for their efforts to develop a potential therapy for treating patients. Phase 1 trials are to determine the safety, tolerability, and pharmacokinetics (think I just choked on my hot dog) of a compound. Multiple ascending dose studies involve multiple dosing as part of their PK analysis to determine if the accumulation of the drug occurs.

CBD and weed may be the next sector to run wild like solar/electric vehicles have. Here's why:

"Global cannabis sales for 2020 will reach $19.7 billion, an increase of 38% over 2019 sales of $14.8 billion—even reflecting the impact of the COVID-19 pandemic—according to updated market forecasts published by BDSA (formerly BDS Analytics), the leader in comprehensive, accurate and actionable cannabis market intelligence and consumer research. Over the longer term, BDSA predicts global cannabis sales will reach $47.2 billion by 2025, a compounded annual growth rate (CAGR) of 22%."     -

Demand for weed is growing, and why wouldn't it? Weed's awesome. The pandemic has bolstered sales to be stronger than economist's expectations. The government restrictions on cannabis continue to stall the prospects of ingestible CBD products becoming FDA approved, as well as any growth in sales in drugstores and grocery stores. State-regulated dispensaries and e-commerce channels are taking advantage of the regulatory environment to plant the seeds, pun intended.

THC products have grown 66% over the past year, with flower quadrupling.

There are many reasons for an increase in demand. One being the pandemic, giving many the time available to consume marijuana. These past few months have also been very tough, and many have seen an increase in anxiety levels along with sleep issues; this in itself will bring many users to the market. I am bullish because many users might not want to turn to an unauthorized market. Many states have allowed curbside delivery and pickup temporarily, which may end up being permanent. These new methods of delivery have encouraged businesses to sell online and enabled users to buy as if they would their 29th kitchen knife set on Amazon. Boom, all this allows the use of online payments through your credit card. The simplicity of this transaction presents an opportunity for massive growth in the cannabis market.

More states will look to legalize. Soaring deficits and joblessness will certainly accelerate the process of legalization, in my unprofessional opinion. New York was a state considered likely to legalize through the legislative process, but it has been deferred. New Jersey just voted YES to legalizing recreational marijuana. With this approval, the pressure will increase for New York to do so as well. Other states that have the opportunity to legalize through legislature on the East Coast include Connecticut and Pennsylvania, both of which have medical programs. There is talk that Florida, which is likely to have a ballot initiative in 2022, could also legalize through the legislative process.

Lastly, the barriers are so damn tough. Like federal taxation for instance, which is known as 280E, a rule that can lead to large income tax bills for cannabis companies that are generating losses. Others are a bit more subtle, like banking and research. No law prevents cannabis companies from accessing bank services, but banks are reluctant to have relationships with them due to concerns about how anti-money laundering laws might be applied. Credit unions and smaller banks tend to work with state-legal operators, instead. But still, the state-legal cannabis companies have been unable to get bank loans, trade on major exchanges, or use major credit card processors. Over the years, there has been a progression in congress to make the regulations a bit friendlier, as well as addressing the financial services and research.

The chart

IGC Daily Chart
  • The highs hitting the top of the triangle make me think that it's a bullish pennant pattern. It keeps knocking on the resistance until it broke out today.
  • Keeping an eye on the MA(50) and (200) for the cross.
  • Above-average volume in early September, as shown by the green bars. Looks like it's being accumulated (look closely at the volume).
  • Higher low in November in comparison to October.
  • Needs volume and momentum. Weed sector will get hot in my opinion.

I am long $IGC for a swing to $2. Here's to a future of space cookies and green portfolios.

**Not a financial advisor. Articles are opinions only.