(NEW YORK)— CBD stocks may be a sector to revisit as states move to legalize infusion of CBD into food, beverages, and cosmetics.
In note to subscribers, Ludlow Research made point that since October 2018 CBD stocks have gone through a long drawn out correction with many issues showing bottoms near-term based on sideways trading patterns.
Possible End of Sector Correction
Historically, long corrections help ween out any excess within a sector after a bubble, and some indicators are showing the CBD sector as a place to start putting money back to work for traders looking for a more reasonable price valuation.
When a sector has a hyperbolic run, like we saw in CBD stocks in the fall of 2018, these stocks tend to trade at very high premiums due to investor demand. But what usually follows these bubbles are long drawn out corrections, which tend to "bore" out the fast money traders to move on to other sectors and plays.
This trend is a healthy phenomenon as it helps ween out the excess within a particular stock or sector, which then offers more attractive targets for long-term traders looking for a good entry point to park money in for next leg up.
California to Legalize CBD Infusion
The California State Assembly on Wednesday passed a bill that would authorize the retail sale of hemp-derived cannabidiol (CBD) in food, beverages, and cosmetics.
The bill, AB 228, clarifies food, drinks and cosmetics that contain hemp-derived CBD are legal for sale in California. The bill, the U.S. Hemp Roundtable wrote in a recent update, “would expressly permit the retail sale of hemp-derived CBD in foods and supplements, and also in topical applications.”
For these reasons Ludlow Research has issued an opinion that CBD stocks may offer a good entry point at these levels for longer-term investors based on a multi-month correction within the sector, reduction of excess premiums in these stocks, and prospects of more states legalizing CBD infusion into food, beverages, and cosmetics.
CBD Stocks to Watch
MJ - MG Alternative Harvest ETF
YOLO - AdvisorShares Pure Cannabis ETF
NBEV - New Age Beverages Corp
…on the smaller cap level
CVSI - CV Sciences Inc
KGKG - HighDrate CBD Energy
HIPH - American Premium Water Corp
CIIX - ChineseInvestors.com Inc
PURA - Puration Inc
SWRM - AppSwarm Inc
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