Chasing Themed Rallies | Podcast Episode #359

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, everchanging world of finance. Learn what it means to trade profitably and consistently managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market, and I’m ready to show you how. Hey everybody, this is Ryan Mallory with Swing Trading the Stock Market. In today’s episode, we’re going to talk about cannabis stocks. The Chase or not the Chase. That’s the subject of this e-mail that I got from a guy.

0:43
I don’t use his real name, so I’m going to give him a good Florida redneck name like I always do for this episode. I’m going to call him Bodeen. I don’t think I’ve ever used Bodean as a redneck name on this podcast before, but Bodean writes Hey Ryan, got to say your podcast is straight fire.

1:01
So here’s where I’m at. It seems like everyone and their mom is talking about jumping into the cannabis stocks right now and I can’t lie, I’m feeling a bit of fun with myself seeing them rally one after the other. But I’ve been burned before chasing these hot trends.

1:17
You know what I’m talking about? I actually do know what you’re talking about, 00 K, he says. He goes on to say. He says it’s like I’m stuck in this loop. When I chase, I get burned and when I don’t, I’m left kicking myself for missing out. So I’m reaching out to you, the voice of reason, and my podcast playlist, to shed some light on this matter.

1:38
You think it’s wise to hop on this cannabis stock bandwagon right now, or should I keep my distance and maybe look for other opportunities? It’s like walking on a tightrope for me and trying to figure out when to make the leap or just not make the leap at all. Your thoughts on this will be a total game changer for me.

1:55
I can’t wait to hear what you have to say. Thank you. Keep doing your thing, Bodine. Thank you Bodine for writing the show. Now, before I get into his answer, cannabis has been really hot. But what’s even hotter than that is swingtradingthestockmarket.com. Yes, that is the patron website that goes along side by side with this podcast.

2:13
You’re gonna get my stock market research each and every day. That’s gonna be in videos on different trade ideas that I come across. Big tech updates. Market updates. You’re also going to get my bullish and bearish watch lists each week, plus my daily watch lists of stocks that I’m looking to either get into from a long side or a short site.

2:29
It’s really good stuff. Check it out. swingtradingthestockmarket.com. Now with all that behind me, I can get to the meat and potatoes of this podcast. So First off, for those who don’t know the pot stocks, they’ve been pretty hot lately. Not to make things rhyme or sound like a poet, but they’ve been on fire.

2:46
They’ve been going higher and higher each day. Gosh, there’s a lot of puns when I’m talking about pot stocks in the stock market, but they are, they’re super high. But over the last 3-4 years, if you’ve been watching cannabis stocks, they have been taking a royal beating. And throughout that time there’s been moments like the one that we’ve seen over the last four or five days where they’ve gone on these massive rallies, but they’re very short lived and they completely fall apart.

3:10
And each time people just buy the truckloads, get sucked into the trades and when they do, they only last for a little bit. I’ve traded them in the past, very little luck on those things. I’ve tried them from long term standpoints, not anything I want to brag about or even dedicate much time to because they have not provided any good returns.

3:28
They’ve sucked and they’ve sucked for 3-4 years now. You can find so many pops in these stocks, whether it’s MJMSOSCGC, Tilray, TLRY. When they pop, it looks like this is the game changing moment for the stock and they could just completely fall apart.

3:46
If you get into the ETS, it’s the same thing. And so I did a video the other day on cannabis stocks. Do I think they’re going to continue to rally? I provided the technical analysis guys. You would have thought that we were talking about the A I theme here where people are like this is the game changer. It’s never going back and maybe I’m wrong this time and maybe I have to eat my words.

4:05
I’ve eaten my words before, but in general, when you look at the history of the cannabis industry and how it relates to stocks, there’s been so much fraud, there’s been so much waste, there’s been so much dilution of shareholder value. I don’t know what people are actually wanting to get long on these things.

4:21
For most of the companies out there that exist in this area, they’re not good, and I’ve just even saw where there’s lawsuits going against them as well. It just hasn’t been a good scenario to be in over the last few years. And that’s one of the things that I think a lot of traders get themselves in to trouble with in general is they bounce from fat to fat.

4:39
There’s the short term fads out there and then there’s these like long term trends. And when you talk about the short term fads you’re talking about like cannabis and solar and and they’ll have their moments, they’ll they’ll pop and then they’ll drop really fast. You’ll see it with individual stocks. You know the short squeeze theme, people were trying to squeeze the crap out of every single stock that had a heavy short float, you know, that was with the whole GameStop AM C, Where’s GameStop now?

5:03
Where’s AM C? Have you seen AM C lately? I think the day that I did this recording here was down another 34%. And that’s after, like, over the past month, it’s dropped from 52 down to 8. These themes, they feel like they’re going to last forever and you’re going to get in at the very beginning and it just goes up for eternity.

5:20
And then five days later, you’re wishing that you never even heard about the stock. And I mean, think about what the misery that people are in with AM C thinking to themselves, oh, this is going to be great. They get in at 54. Now it’s trading at 8:00, and it’s because they keep jumping into these things.

5:36
Oh, we’re going to get the institutions, We’re going to get Wall Street this time. We’re going to squeeze them. It’s going to the moon and back, and it doesn’t happen. It’s these shortterm themes, the Wall Street bets crowd, they’re all over these shortterm themes. And then they last for a couple days. And usually the people who are the ones making the most money off of it are the ones that are probably pumping it or the ones that were in it before it ever started.

5:57
And so when you get the pump, they’re selling to you their shares at these crazy valuations and they got a lot of shares. And then you might be you and 1000 others might be buying a couple shares each thinking that it’s going to keep going. But no, you’re just helping that guy book profits and he’s probably the one that was behind the whole madness of the pump and dump in the 1st place.

6:15
You get those whales, they get into it early on, whether it’s off insider information or just dumb luck. And then when the stock goes up, they’re offloading their massively inflated share values off on you. The cannabis industry, these stocks have been constantly a shortterm, pump and dump theme.

6:32
So for Bo Dean, he hasn’t gotten into it yet, and that’s a good thing. He’s probably saving himself a lot of money by not getting into it. Because really, in order to profit off of these things, you have to be the person that got in early on. And with the cannabis stocks, I mean, honestly, if you’ve been in cannabis stocks for, you know, a couple years or whatever and you get the kind of rally that we’ve seen over the last four days, you’re probably offloading your serious value.

6:54
Look, I’m tired of holding on to this thing. It’s burning a hole in my pocket. I just got a massive rally and MJ or MSOS, I’m going to sell and let somebody else be a bag holder. I’m done. And so it’s running into resistance. People are booking gains. They’re getting out and then that’s the end of the rally.

7:09
But then you also have much bigger thing. We’re in one right now with the A, I theme. I mean, think about how much stocks like Google, NVIDIA and meta, how much did they have benefited off of the AI thing. Is that something more than what we’re seeing with the cannabis stocks?

7:25
Absolutely. Much bigger. You had it back in the 90s with the.com thing. These things are much bigger. They’re much easier to capitalize on or to make money off of because they last longer. You’re usually seeing a multiples expansion across the board, not just in like a a sector or an industry, but the market as a whole.

7:45
And you look at since the AI theme has become really popular here in 2023, the whole market has rallied as a result. But cannabis is not going to rally the whole market. It might help rally, you know a specific industry or two, but it’s not going to rally the whole market. So the short term themes, they tend to be more of your pump and dumps.

8:02
They tend to be a lot of what your retail crowd gets sucked into. And then when the whales offload their shares, retail takes ownership of a shortterm theme of shortterm fad that they don’t even realize it’s over. And then when it comes crashing down on them, then they want to blame it for being a rigged market.

8:18
Now it’s the people got out of it and you became the bag holder. That’s essentially what is some of the things that lead to that. Unethical. Absolutely. But I would say almost every time you see a stock go up 100 or 200% in a very short time period, there’s a very good chance that that’s going to come right back down again.

8:35
Especially when it comes to these much smaller stocks with lower share prices with lower volume. Just like what we saw with GameStop. Just like what we saw with AMC stocks going from 4 to upteen $100 a share. Yeah, they’re going to come right back down again. And AM C, you talk about one that really looks bad.

8:53
Holy cow, that one looks like an absolute disaster. But how many people have their money all tied up in AM C right now? And they’ve lost it all because they thought that AM C was going to be the next big short squeeze like GameStop. It never happened. Yeah, I know AM C had some of its moments a couple of years ago, but only Did it ever come back?

9:10
No, at least not at the time of this podcast, it didn’t. You also had another thing. Remember back in 2020 with the whole COVID lockdown, 14 days to flatten the curve mark. It completely tanked for like five straight weeks. A lot of people were shorting and then all of a sudden the market just turned on its ear and went straight back up.

9:29
And so you had to shut down, which was a short term theme. And then you had the reopening, which was a much longer term theme that went from 2020 all the way to the end of 2021. And that reopening theme was huge. And then you had the China reopening and all these other things that went along with it.

9:45
That was a playable theme. Interest rate hikes in 2022, where the market completely fell apart for the entire year, pretty much all the way up until about October, late October where it finally bottomed. Very, very playable. Longterm theme. But when you’re starting to get into the solar place, yes, there’s some money that can possibly be made off of some of these.

10:04
There’s people that have made money off of them. I’m not saying that that can’t happen, but most people are going to lose money on, especially when you’re seeing the rally over the last four days thinking to yourself, I’m going to get it now after it’s made the majority of its move or what appears to be the majority of its move.

10:22
And all of a sudden you’re like I got to get into this thing and then you start back holding for everybody else. It starts dropping 20% and then all of a sudden you’re realizing it to yourself, why did I ever get into this to begin with? And that’s what we want to avoid as traders. Because in the end, it’s not about 1 trade.

10:39
And I say this all the time, it’s not about 1 trade that’s going to define you as a winning trader, as a good trader. It’s going to be a whole history of making good decisions, making good decisions on getting out of losing trades, making good decisions on profit, taking out of you’re winning trades.

10:57
But it only takes 1 trade to define you as a losing trader. And that’s what we don’t want to do. That’s the one thing we want to avoid at all costs.

11:15
And if you start getting into these fads, you start dumping all your money like into the Amc’s, into the game stops where you’re getting in well after the fact. We’re in this cannabis rally here. Could it go up another 100%? It sure could. And if it does, it’s going to suck in a whole bunch of other retail traders that are going to think that, oh, it still has more room to go.

11:31
Yes, it could go up higher. I don’t have a crystal ball, but I can tell you the themes, the shortterm themes, especially when I keep seeing them repeated over and over and over again about this is going to be legalized, this is going to be commercialized, This is no longer, you know, this kind of misdemeanor or whatever.

11:47
When we start seeing these themes popping up all the time, someone’s guaranteed it’s going to be a shortterm theme at some point in the future. Yes, there will be opportunities to make money off of these cannabis stocks. More than likely I would expect that it get legalized at some point, will become much more commercialized, become an industry of its own that a lot of people depend on for whatever reasons.

12:10
The point is, yes, it’ll make money at some point, but when we’re trying to hop onto these short term things here, I mean it’s just when you’re seeing these pops of 100%, two, 100%, whatever it might be and then you start chasing after them, more than likely it usually results in us, the retail trader being a bag holder for the whales.

12:26
So I hope I’m answering Bodine’s questions here. The big thing is, is to know the difference between your short term themes, your long term, you know, long term things. They’re much more sustainable. They’re they result in like a broad market, multiple expansion, short term things. They are very isolated. They don’t really affect the rest of the market.

12:42
They just kind of stay in their corner, kind of like this whole cannabis thing here going on. And it’s important to know the difference because you start, you know, focusing on jumping from one thing to the next with this, the short term themes. More than likely you’re going to lose money because you’re getting in way after the fact after it’s very obvious that the rally has already taken place and you’re just hoping that you can squeeze out a little bit more.

12:59
But the reward risk isn’t in your favor at that point. So stay away from that stuff. So if you enjoy this podcast, that would encourage you to leave me a 5 star review. I really appreciate when you guys do that. Also make sure that you are sending me your questions. ryan@shareplanner.com. I read them all. I want to make it a podcast episode out of them all, and I I pretty much do.

13:17
I make almost a podcast episode out of every one of y’all and your emails. So keep sending them to me. Tell me your stories. I want to hear about them. I want to hear about the other bodeans out there and the other people that I get to make up these fancy rednecknames for. So do that. Check out Swing Trading the-stockmarket.com and God bless.

13:23
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13:41
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14:01
All the best to you and I look forward to trading with you soon.