Trump’s 2025 executive order just reshaped U.S. cannabis stocks. Learn what changed, which tickers benefit, and how to trade the “buy the rumor, sell the news” move.

President Donald Trump just handed cannabis traders the biggest catalyst in decades. On December 18, 2025, Trump signed an executive order to reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act—marking the most significant shift in U.S. cannabis policy in over 50 years. But here’s the twist: while the news is historic, the stocks actually sold off after the signing.​

If you’re watching SPY chop around in an unusually tight range this morning while volume stays elevated, you’re witnessing the setup phase of one of the most volatile trading opportunities of the year—exactly the kind of move discussed in our guide to trading market volatility with the VIX.

What Trump’s Executive Order Actually Does

Trump’s order fundamentally changes how the federal government treats cannabis:​

• Moves cannabis from Schedule I to Schedule III: Marijuana is no longer classified alongside heroin and LSD. It now sits with Tylenol with codeine and anabolic steroids​
• FDA research approval: Federal agencies can now study marijuana for legitimate medical purposes​
• CBD for Medicare patients: Medicare beneficiaries could access CBD products as early as April 2026​
• IRS 280E elimination: Cannabis companies will no longer face the punitive tax code that prevented them from deducting ordinary business expenses​
• Banking access: Marijuana businesses can finally access traditional banking services​

The tax implications alone are massive. Under IRS 280E, cannabis companies couldn’t deduct rent, salaries, or marketing expenses—only cost of goods sold. Removing this restriction could improve profit margins by 30-40% overnight.​

The Market Reaction: Buy the Rumor, Sell the News

Cannabis stocks exploded when Trump’s plans first leaked on December 12, 2025:​

Initial Surge (Dec 12-13):

• Tilray Brands (TLRY): +44% to +52%​
• Canopy Growth (CGC): +31% to +52%​
• Aurora Cannabis: +24%​
• SNDL: +20%​
• AdvisorShares Pure US Cannabis ETF (MSOS): +54% in a single day—its best performance ever​

But when Trump actually signed the order on December 18? Marijuana stocks sold off hard. This is classic “buy the rumor, sell the news” trading psychology. Smart money bought the anticipation and dumped into the reality.​

Trading Strategies for Cannabis Stocks Right Now

Strategy 1: Dip-Buying After the Selloff

The post-signing selloff creates opportunity. Cannabis fundamentals just improved dramatically, but stocks are pulling back because traders who bought the rumor are taking profits.​

How to play it:

• Wait for a 2-3 day consolidation after the December 18 selloff
• Look for volume to dry up (sign of selling exhaustion)
• Enter on the first green candle after a higher low forms
• Target the December 12-13 highs as resistance

Best candidates: Multi-state operators (MSOs) who benefit most from IRS 280E removal​

Strategy 2: Watch the ETFs for Confirmation

The MSOS ETF (AdvisorShares Pure US Cannabis) had its best single-day performance ever with a 54% surge. This is your sector bellwether.​

Trading signals:

• If MSOS holds above its 50-day moving average, the sector is in accumulation
• If it breaks below, we’re still in distribution (more downside coming)
• Use MSOS as your sector health indicator before picking individual stocks

Strategy 3: Swing Trade the Volatility

Cannabis stocks are notoriously volatile. Use that to your advantage:

• Setup: Buy oversold bounces using RSI (below 30) and MACD bullish crossovers
• Hold time: 3-7 days for momentum swings
• Exit: When RSI hits overbought (above 70) or you hit 20% gains—whichever comes first
• Stop loss: 7-10% below entry (these stocks can gap)

Strategy 4: Follow the Volume

The December 12-13 surge saw massive volume across all major cannabis names. When volume dries up during pullbacks, that’s your signal that the selloff is ending.​

Volume analysis:

• Compare current daily volume to the 50-day average
• When volume drops below average during a pullback, buyers are getting ready to step back in
• Conversely, rising volume on down days means more pain ahead

Risk Management Is Critical

Cannabis stocks are extremely volatile. Even with Trump’s executive order, these are high-risk trades:

• Position sizing: Don’t allocate more than 2-3% of your portfolio to any single cannabis stock
• Regulatory risk: Schedule III is a huge win, but full federal legalization isn’t guaranteed​
• Profitability concerns: Many cannabis companies still aren’t profitable even with improved tax treatment​
• Dilution risk: These companies frequently issue new shares to raise capital

Use tight stop losses and don’t marry these positions. Cannabis stocks can gap 20% in either direction on headlines.

The Bigger Picture: What’s Next for Cannabis

Trump’s order accelerates the rescheduling process, but it’s not immediate. The Drug Enforcement Administration (DEA) still needs to finalize the rule change through formal notice-and-comment rulemaking. That process could take several months.​

Timeline to watch:

• Q1 2026: DEA finalizes Schedule III classification
• April 2026: CBD potentially available for Medicare patients​
• 2026-2027: Banking services expand to cannabis businesses

Each of these milestones creates new trading catalysts.

Stocks to Watch

Based on the December 12-18 price action and industry positioning:

Large-cap plays:

• Tilray Brands (TLRY): Led the sector surge, most liquid option​
• Canopy Growth (CGC): Strong brand recognition, high volatility​

ETF plays:

• MSOS: Pure-play U.S. cannabis exposure, tracks MSOs​

Higher risk/reward:

• Aurora Cannabis: Smaller cap, bigger swings​
• SNDL: Extremely volatile, day-trader favorite​

The Bottom Line

Trump’s marijuana rescheduling order is a game-changer for cannabis fundamentals. Eliminating IRS 280E alone could add 30-40% to profit margins. Opening banking access removes a massive operational headache. And FDA research approval legitimizes the entire industry.​

But as traders, we trade price action—not policy. The December 18 selloff after the signing tells us that the initial euphoria is over. Now we wait for consolidation, watch for volume to dry up, and position for the next leg higher when the sector finds support.​

Key takeaway: Don’t chase cannabis stocks at current levels. Wait for a technical setup. Use the MSOS ETF as your sector gauge. And always, always use stop losses—this sector can destroy undisciplined traders.

Cannabis stocks just got their biggest catalyst in 50 years. Trade it smart, and you could catch a multi-month uptrend. Trade it recklessly, and you’ll get burned by the volatility.

What’s your play on cannabis stocks? Drop a comment below with your favorite ticker and your entry strategy.