Cannabis short sellers are ratcheting down their bets that the beleaguered sector will continue its slide.
Short interest in pot stocks has tumbled to US$632 million from US$3.14 billion in May 2021, even as share prices plunged in the past year, according to data from S3 Partners. While analysts are skeptical that the federal government will approve a legal weed market soon, Congress is set to consider some cannabis legislation, which could lead to a rally in the sector.
The highly volatile sector swings at the whims of lawmakers. Cannabis stocks jumped on news last week that Senate Democrats plan to introduce a bill to decriminalize marijuana, known as the Cannabis Administration and Opportunity Act. Even so, the rally barely dented the steep losses of pot stocks. The ETFMG Alternative Harvest ETF, the largest fund in the sector, spiraled 47 per cent this year.
The boost may be short-lived as analysts expect the decriminalization bill to fail since it would need 60 votes to pass in a Congress where most Republicans and some Democrats oppose it.
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