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 11, my (proprietary) Canadian Cannabis Company Index (MCCCI) decreased by 7.3% compared to the prior week when it increased by 2.6%. 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 2 trading weeks left in 2020, it appears my thesis of a significant downturn in the sector is likely to be sustained.

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.

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The Good

There were no stocks that increased by more than 10%, which is my metric for inclusion in this 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: CBWTF -15.3%. Auxly Cannabis Group Inc. has now been profiled 6 consecutive weeks here and given the 1/64th probability of being 1005 right on this chameleon of stock, I would suggest anyone who’s been successful should consider taking Jim Cramer’s advice and buy themselves a new cashmere sweater for Christmas.

The Ugly

There were 2 stocks that decreased by 20% or more, which is my metric for inclusion in this category: WDDMF -30.5% and FLWPF -26.9%. WeedMD Inc. and Flowr Corporation have had horrific price plunges of 70+% in 2020 and I consider them prime candidates for the tax selling season.

Valuation Metric Review

There was a 7.2% decrease in the “Big Four” compared to the prior week’s 1.7% decrease. I consider this a “red flag event” which will continue to trickle down to the rest of the sector, as enumerated in the next section of the report.

Recap

The relative strength index decreased by 4.0% compared to the prior week when it decreased by 22.4%. The “cautionary tale” which I cited in my 12/7 report imploded (and then some) as all 25 MCCCI portfolio stocks decreased in value. This was truly a “perfect storm” for traders with a bearish bent and I have advised my private clients as to why I am “at the ready” going forward. Suffice it to say that I believe “nervous water’ surrounds the sector.

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