Cannabis stocks are surging, helped by positive regulatory steps in the United States. Tilray Brands (NASDAQ: TLRY) stock jumped to $2.4 in the pre-market, its highest level since January 9th of this year. It has spiked by more than 50% from its lowest point this year.
Aurora Cannabis (NYSE: ACB) has not been left behind either as it jumped to $5.30 on Monday. Other companies like Cronos Group and Canopy Growth have soared by double digits in the past few days.
Tilray Brands vs Aurora Cannabis stocks
Why Cannabis stocks are soaringThere are two main reasons why cannabis stocks have been in a strong bullish trend in the past few days. Both of these reasons are related to regulations in the US and Germany.
In the US, the Drug Enforcement Agency (DEA) is considering changing the classification of cannabis. If this happens, cannabis will be put in a less harmful category, which is a positive move for the industry.
At the same time, there are signs that the Senate will pass federal cannabis laws. Senator Chuck Schumer is circulating a petition for the marijuana banking bill that has been in consideration for years.
The bill would make it easy for banks to provide services to companies in the industry. While some states have legalised cannabis, many banks are reluctant to offer these services because of their classification by the DEA.
Meanwhile, there have been some positive moves in Germany, Europe’s biggest economy. Legislators there passed a bill that will legalise the recreational use of cannabis in the country starting in April. The government aims to reduce the growth of the black market in Germany. The health minister said:
“Please use the new opportunity responsibly and help protect children and young people. Hopefully, this is the beginning of the end for the black market today.”
Is it safe to buy Tilray Brands and Aurora Cannabis stocks?The recent legislation moves are positive for cannabis stocks like Tilray Brands and Aurora Cannabis. Their biggest wins would be if the US government passes a broad cannabis legislation, which is highly unlikely in the current divided government. Most Republicans oppose moves to legalise cannabis.
However, Tilray and Aurora buyers should be cautious about the Fear of Missing Out (FOMO) in the industry. For one, this is not the first time that these stocks have surged because of optimism on regulations.
For example, Aurora Cannabis shares jumped by over 160% from its lowest point in August to its highest level in September. Tilray Brands soared by 126% between June and September and then tumbled.
Therefore, there is a likelihood that these stocks will suffer a sharp reversal in the coming weeks as these policy hopes fade.
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