Editors' note: This article discusses one or more penny stocks and/or microcaps. Such stocks are easily manipulated; do your own careful due diligence.

For the trading week ended December 18, my (proprietary) Canadian Cannabis Company Index (MCCCI) decreased by 1.4% compared to the prior week when it decreased by 7.3%. The index consists of 25 stocks, many of which are among the most widely held holdings of the 3 ETFs (MJ, CNBS, and THCX) that I consider to be a reliable barometer of the Canadian cannabis sector. MCCCI's differentiated business model is both weighted and market capitalization based because I believe that this approach best represents the current landscape of the Canadian cannabis sector. With only 8 trading days left in this year, my thesis of a significant downturn in the sector in 2020 is a virtual certainty

My mid-year report (published here on TalkMarkets) showed that the MCCCI had decreased by 36% YTD, which I stated may be a guidepost for the rest of 2020. I fully expect the year-end report to mimic the earlier metric. Now let us look at this week’s good, bad and ugly stocks.

Image Source: Unsplash

The Good

There were 3 stocks that increased by more than 10%, which is my metric for inclusion in this category: BHHKF +15.8%, FLWPF +14.3%, and WDDMF +12.0%. (Source: SA) Benchmark Botanics Inc. is in the lowest quintile of MCCCI stocks, and it has a de minimis effect on the performance of the portfolio. Flowr Corporation and WeedMD Inc. both bounced back from being members of last week’s “ugly” stock category.

The Bad

There was 1 stock that decreased by more than 10% (but less than 20%) which is my metric for inclusion in this category: RDDTF -17.2%. in my view, Radient Technologies Inc. faces an uncertain future due to their challenged financials.

The Ugly

There were no stocks that decreased by 20% or more, which is my metric for inclusion in this category.

Valuation Metric Review

There was a 2.3% decrease in the “Big Four” compared to the prior week when it decreased by 7.2%. I believe this decline was mitigated in large part by the mega-merger of Tilray, Inc. (TLRY) and Aphria Inc. (APHA). It appears to me that industry consolidation, which is foundational to my sector thesis, will gain momentum in 2021.

Recap

The relative strength index increased by 3.2% compared to the prior week when it decreased by 4.0%. For the 2nd consecutive week, all of the “Big Four” decreased in value. APHAs -4.0% decline was surely a gut check to the cannabis bull case, and I have put this stock at the top of my “watch list.”

Let us see how this increasingly volatile sector has performed at the same time next week shall we?