Marijuana Sector Trying To Hold This Week's Retest Of Recent Lows

The morning of Tuesday, April 29, wasn't much different than other recent morning. Not for the marijuana sector, unfortunately.

Many issues were slipping, many of those for a third consecutive session.

The morning of Tuesday, April 15, was worse. And not just for the marijuana sector, which had been sinking for weeks. The broader market, (S&P 500 (NYSE: SPY)) too, had finally reversed down hard, losing four percent in just over a week.

Four percent? Lightweight.

Broader markets and the marijuana sector hit lows into and out of that day. The sector's weeks of selling culminated in at least a temporary bottom for many of the sector's stocks that bounced at least briefly. Some others have continued bouncing.

Few among those issues that did start bouncing two weeks ago continued bouncing. That's not necessarily bearish. Trying to rally too high too quickly is how tops are (were) made. What makes these brief bounces potentially bullish is that many have not been retraced entirely.

See also: A Look At 2014's Leading Cannabis Stocks

In fact, many of the retracements back down to their two-week old lows have held at 61.8 percent --- or a derivation -- of the distance.

The afternoon of Tuesday, April 29, didn't begin much differently than the morning. But its ending may be a little better. There are some signs of "nibbling" here and there. Of 50 marijuana stocks sampled in the morning, only two were positive. But 10 were positive ahead of the close. This is nothing more than anecdotal, if that, and certainly not in itself evidence of a bottom.

This week Morgan Stanley has issued guidance on GW Pharmaceuticals (NASDAQ: GWPH) specifically because of its cannabis operations. The FDA awarded GW Pharmaceuticals the so-called fast track for approval of its drug Savitex. And, the previously anti-marijuana stock stock-guru Jim Cramer talked up the stock twice this week. The sector is overdue for this much air of legitimacy.

Like the last bottoming effort, the next bottom won't be a rising tide that lifts all boats. Some issues have since extended down to lower lows, and some only now are probing prior lows that were barely threatened two weeks ago. Are these signs of another big down leg coming? Perhaps.

Often, however, this is simply the inverse of an extended rally whose leadership is rotating into the laggards -- the downside "leadership" may be overdone.

Check out the Marijuana Stock Technical Trader on Wednesday, April 30, for an expanded list of "Bottom Fishers" and "Falling Knives," listing the potential extreme prices that might produce bigger bottoms if tested before Friday.