Alberta Cannabis Inc / Distribute via REUTERS
- Cannabis shares fell on Thursday as optimism surrounding federal decriminalization and the strength of Reddit traders to profitability faded.
- Tilray, Aphria, Aurora Cannabis, Cronos and Canopy Growth all move amid the broad sales.
- Members of the Wall Street Bets Reddit page cheered the shares higher as with GameStop in January.
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Pot stock declined from a high, seen earlier in the week as the momentum of casual traders uniting on Reddit washed away.
Tilray led the sector’s losses and dropped to 48%. Aphria and Aurora Cannabis fell by 33% and 23% respectively. Cronos fell by 23% by the lowest day, and the growth of the canopy fell by 24%.
The group of cannabis producers rallied this week amid hopes that the Democrats will soon follow federal decriminalization of marijuana. Canopy CEO David Klein told investors on Tuesday that he expects the government in Biden to decriminalize the drug and expand the U.S. market sometime this year. Tilray CEO Brendan Kennedy said his firm expects federal legalization to take place in the next 12 to 18 months.
The sector received a second boost from Reddit traders in Wednesday’s trading. Members of the r / wallstreetbets forum have started exchanging Tilray, Aphria and other cannabis producers as the next shares to make excessive profits. Reports with a huge return on the call options in the stock rose to the top of the Reddit page and received thousands of comments.
Read more: Reddit retailers hope for cannabis supplies and increase valuations, but experts say they are betting on the wrong companies
By the time the markets closed on Wednesday, several pot stocks were at their highest levels in years. Exchange traded funds, including Global X Cannabis, ETFMG Alternative Harvest and Amplify Seymour Cannabis, have been the best performing ETFs of the year so far.
The enthusiasm of the retailer seems to have grown. Profit taking overcame the increase in the pot stock when the market opened on Thursday, causing the shares to fall sharply immediately.
The sudden turnaround calls into question Reddit merchants’ ability to bring about sustainable rallies. The GameStop phenomenon that dominated the chatter in January also faded this month as those who piled up made gains or limited losses. Wall Street Bets day traders have since climbed around other stocks, though not with the unit that fueled GameStop’s boom.
To be sure, the pot stock plummeting in Thursday trading remains well above the prices seen last month. Tilray, for example, remains 421% higher than the previous year.
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