ASX Watch: Speculation Sends Ecofibre Surging

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What’s more exciting than explosive stocks?

You could say explosive cannabis stocks!

Why do I say that? Explosive moves like this are not uncommon in this sector.

And that’s especially true for investors in Ecofibre Limited [ASX:EOF].

The stock surged over 25% in just two days.

Not sure who Ecofibre is? Well you’re about to find out…

Who is Ecofibre?

We’ve been following this stock since it listed back in March.

And for one good reason.

This company grows hemp and makes products based around the cannabinoid known as CBD.

There are four divisions underneath the umbrella of the company. Each of these focuses on different market segments within the hemp/CBD sector. 

Ecofibre has a leg in growing hemp in the US state of Kentucky, producing hemp foods and also selling CBD oil for healthcare professionals.

It also has a division called Hemp Black, which is designed for research and development.

As you can see, it has a good chunk of the opportunity in this space covered!

Why has the stock run up 25% in the last two days?

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The recent rally in the stock drew the attention of Ecofibre’s management.  

They decided to release a statement to cool things down.  Often, stocks get a ‘speeding fine’ from the ASX when there’s a large unexplained move. 

The company said the ‘recent increase in share price on higher volume’ was noticed and that it was not aware of any information that could have caused this to occur.

However, it did mention that its products were growing in presence in pharmacies in the US — the company’s key market.

Investors tend to jump into a rising stock in anticipation of positive news. It looks like they had the right idea at least…

Source Optuma

And while EOF has risen over the last few days, we really need to wait until the company’s next quarterly report, due on 11 July, and the full year results, due on 29 July.

Please don’t take this as a recommendation to buy Ecofibre. It’s an observation of recent market action only. I hope you found it interesting.

Until next time,

Jim Rickards Signature

Jonathan Evans,
Analyst, Profit Watch

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