Extreme Trades for the Week of May 21, 2018May 23, 2018
Extreme Trade No. 1 — Applied Materials (AMAT)
Just last week, shares of Applied Materials beat on the top and bottom line, but slipped on a weaker than expected sales outlook. But what’s interesting to note is that every time this stock gaps lower, as it has many times, it doesn’t take long for the stock to rebound and refill its bearish gap, as it’s again trying to do now. After finding double bottom support around $48 a share, we believe AMAT can refill its gap at $54 shortly. Plus, it appears to have found strong support at $50.25.
There are two ways to trade AMAT here. One is to buy the AMAT stock at market prices.
The other is to buy to open the AMAT July 20, 2018 50 calls at market prices.
Extreme Trade No. 2 — Canopy Growth (TMWJF)
According to the company, it now has 2.4 million square feet of licensed growing capacity and could be on the way to increasing that figure to 5.7 million square feet. Though Canopy hasn’t hasn’t specified its timeline for when its greenhouses are expected to be complete — it seems reasonable to expect annual production to near or top 500,000 kilograms when at full capacity. What we like most about this stock is that it will soon list on the NYSE under the ticker CGC.
That listing will open the door to door to institutional investment, as well as help bring legal cannabis investing into the mainstream. “One of the primary drivers of this listing is, as we are expanding globally, having U.S. institutional investors helps,” said CEO Bruce Linton. “I think the investment community has to drop the pot jokes and talk about the investment grade opportunity.”
Controversial or not, marijuana stocks are likely to push higher this year. Right now, more than 29 U.S. states plus Washington, D.C. approved marijuana’s medicinal use. Eight states have approved its recreational use. New Jersey may approve its recreational use this year, as Governor Phil Murphy promotes a bill that would legalize it. Michigan may approve it, as well.
On July 26, Oklahoma will vote on State Question 788, which proposes legalization of medical marijuana and the establishment of a state system to tax and regulate its use. As the legalization boom continues, some analysts believe the marijuana industry could be worth well over $50 billion by 2021.
Even Canada is considering legalizing its use across the country by August 2018. If that happens, the country could see millions, if not billions in sales. If legalized, analysts say by 2021 Canada could have nearly four million recreational marijuana users, creating a monstrous $4.5 billion industry. The industry could balloon to $8.7 billion shortly after, as marijuana retail sales, just in Canada. are likely to surpass beer, wine and spirit sales combined.
Technically, the stock just broke above a multi-month consolidation pattern to $30. We have a near-term price target of $35 once it begins trading on the NYSE.
Buy the TWMJF stock at market prices.
Extreme Trade No. 3 — Campbell Soup Company (CPB)
The company has struggled lately, most recently with a sharp decline after cutting its full-year guidance. It even fired its CEO after its stock price plummeted. But with a new CEO transition plan in place, there are hopes things can turnaround here. Plus, with the stock as hated as it is right now, it’s the perfect time to buy with the stock now at bargain basement prices. Plus, we believe a lot of the bad news has been priced into the stock, which now sits at a 52-week low. Investors are slowly buying again on hopes the recent bearish gap can be filled at $40. In addition, CPB is no stranger to tough times. But each time the stock gaps down, that gap gets filled not long after. While this trade does carry higher risk, we believe it’s worth buying at a 52-week low.
Buy the CPB stock at market prices, and the CPB August 17, 2018 34 calls at market prices.