Written by Moneypig Trading Inc. on March 31st, 2022
TLDR:
House is likely to pass MORE Act (H.R. 3617, a.k.a. marijuana legalization) voting in House, on April 1st, 2022
Marijuana stocks ($TLRY, $CGC, $ACB, $SNDL, etc.) are heavily shorted
Marijuana stocks ($TLRY, $CGC, $ACB, $SNDL, etc.) call: put ratio are around 3.5: 1 as of today
If MORE Act passed, possible short squeeze and gamma squeeze on cannabis stocks tomorrow April 1st, 2022, and in the week of April 4, 2022
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CC image from Flickr democracychronicles
Currently, marijuana is a US Federal Class 1 drug. Thirty-seven states have legalized the medical use of marijuana, and eighteen states have legalized the recreational use of marijuana. Therefore, there are many voices to legalize marijuana at the federal level. Since this blog is a trading blog, we are not going to discuss much politics. But to legalize marijuana at the Federal level, a marijuana legalization bill needs to pass through the US House (rule-based), then US Senate voting event approval (61 votes required), then US Senate formal voting session (51 votes required to pass a bill), and finally the US President will likely sign the bill.
There are two legalization efforts on the surface:
MORE Act (H.R. 3617, a.k.a. marijuana legalization)
2. Senate Majority Leader Schumer might push another bill for voting in April 2022
The marijuana community and traders have been eyeing the upcoming MORE Act (H.R. 3617, a.k.a. marijuana legalization) voting in House, likely on April 1st, 2022.
If we break down the voting results for today (March 31, 2022), House passed H.R. 1017, providing for House voting consideration of H.R. 3617, MORE Act (marijuana legalization), and H.R. 6833 (Affordable Insulin Now Act).
Shortly after H.R. 1017 passed, House passed H.R. 6833 (Affordable Insulin Now Act) with the following voting results in Figure 1:
Figure 1. House H.R. 1017 & H.R. 6833 Voting Results & H.R. 3617 (Marijuana Legalization)
We can clearly see that the voting results follow the party line. However, it does seem like one Democratic representative didn't vote for H.R. 1017, and assume that Democratic representative will vote Nays on marijuana legalization. In this case, H.R. 3617, MORE Act (marijuana legalization) will still easily get 219 Yeas votes v.s. 202 Nays vote on April 1st, 2022, and get the House approval. Of course, this approach is an extrapolation. If you have deep knowledge of marijuana legalization, feel free to leave comments down below.
Currently, there are a lot of doubts on social media if H.R. 3617, MORE Act (marijuana legalization) can even pass a Democratic dominant House in the near future. Moreover, among 69 voters in our poll, 21.7% of participants believe a marijuana stock $CGC will trade lower than the current $7/share in the next 4 weeks.
Figure 2. Marijuana stock $CGC price action poll
Marijuana stocks like $TLRY & $CGC had a nice pop last week & have been consolidated for five days.
Figure 3. Marijuana stock $TLRY $CGC Daily Chart
These marijuana stocks have been heavily shorted. Based on the Nasdaq and Yahoo finance data. As of March 15, 2022
$CGC 17.74% is short
$TLRY 14.90% is short
$ACB 15.30% is short
We believe the semi-monthly short interest data, released in April, 2022, will show an even higher short interest number since there is no share available to short in the past few days.
Figure 4. there is no share available to short in the past few days
Based on the options clearinghouse data, Maximum Pain data (https://maximum-pain.com/options/TLRY), and our affiliate FlowAlgo (https://app.flowalgo.com/users/aff/go/moneypig using the promo link above you can get a discount: $25 for the 25 days trial!), these marijuana stocks have high call put options ratio, meaning the options market heavily betting on the bull side and can cause the $GME $AMC type of gamma squeeze.
Figure 5. high call put options ratio
The current marijuana stocks like $TLRY & $CGC setup is very similar to the $AMC & $GME in Jan 2021: heavily shorted, high call: put options ratio, and the technical chart. They could be a perfect case for gamma squeeze and short squeeze in our humble opinion.
Figure 6. Marijuana stock $TLRY and the meme stock $AMC daily chart
What is your thought? Feel free to leave a comment on our social media or down below!
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Just a quick disclaimer: Moneypig Trading (https://www.moneypigtrading.com/) is not a financial advisor. Please invest at your own risk. We are also long $TLRY, $CGC stocks, and call, put options.