Why the pot stocks crashed lower

After days and days of smoking the market with sizeable gains, it was the turn of the pot stocks to get smoked on Wednesday.

As you can see below, almost all pot stocks finished the day with heavy declines. Here’s how things finished:

  • The Auscann Group Holdings Ltd (ASX: AC8) share price fell 12.5% to $1.62
  • The Cann Group Ltd (ASX: CAN) share price tumbled 5% to $3.58.
  • The Creso Pharma Ltd (ASX: CPH) share price dropped 9% to $1.04.
  • The Hydroponics Company Ltd (ASX: THC) share price was down almost 7% to 91 cents.
  • The MGC Pharmaceuticals Ltd (ASX: MXC) share price fell 5% to 10 cents.
  • The MMJ Phytotech Ltd (ASX: MMJ) share price dropped 3.5% to 56 cents.
  • The Zelda Therapeutics Ltd (ASX: ZLD) share price was down 4% to 11 cents.

What happened?

With no news out of these companies or any further developments in the industry, this appears to be a profit-taking sell-off by traders. This is something that I had warned was likely to happen on Tuesday of this week.

And it shouldn’t really come as a surprise to investors. Some of these pot stocks had put on gains of over 50% in just a matter of days, with AusCann even managing to double in value.

In fact, despite yesterday’s sell-off, AusCann’s shares are still 80% higher than where they were a week ago.

Are there more declines ahead?

That all depends on how traders and chartists feel. As such, I would suggest that investors stay clear of the pot stocks for now and wait for things to settle.

Overall, while I do think that some of these companies will have very bright futures ahead of them and could be great long-term investments, I feel investors would be better off waiting to see what kind of revenues they generate over the next 12-24 months.

In the meantime, I think investors should consider grabbing hold of these hot growth stocks.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.