Filter This! Trial by fire

Today”s filter is…Trial by fire.

Pullbacks and corrections have a cleansing effect. Trends don”t play-out in straight line, and must occasionally retrace — and often consolidate sideways — before resuming the trend to its completion. 

Those retracements help to rid the trend of its less committed “sponsorship.” In the case of an uptrend, the dips help to attract new sponsorship at relatively cheaper prices.

But that”s not the cleansing effect.

Extended super-duper outperforming rallies tend to pull along most every related stock. A famous stock market quote summed that up as “Bull markets make geniuses of us all.” Those rallies tend to be followed by deeper and at times steeper dips. Drops.

The more harrowing those drops, the more destructive their effects. Not only on price, but on participation. Not only participation from the fringes, but participation of every related stock. As the drop is extending, participants look more critically at just what the h3ll they”ve been buying so indiscriminately.

After retracements, not all stocks continue their rallies. And not all stocks that continue their rallies will have as much participation. But those stocks that do resume rallying — especially those among the first to resume — and those that exhibit the highest volume, tend to have passed the scrutiny that is as deep as the retracement in prices.

In our space of marijuana stocks, this is especially important. More companies than we want to believe will not survive the influx of competition and innovation. Many of yesterday”s bigger performers were only beneficiaries of being there at the right time. Many of those may have or get what it takes to remain competitive. Those will tend to be the better performing stocks after a deeper drop puts them (and us) all through a trial by fire.

Filter THIS! …is a pre-open missive that tells you one thing, the most important thing, if you had to filter your view of today”s marijuana stocks price action through just one thing — okay, sometimes two — what would that one thing be?