Weed Stock Ready to Light Up the Charts Again

ACB's recent pullback could be a buying opportunity

Managing Editor
Jun 6, 2019 at 1:50 PM
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Shares of marijuana concern Aurora Cannabis Inc (NYSE:ACB) are down 3% to trade at $7.50 today. ACB's technical setup has been bleak of late, with the stock heading toward a third straight weekly loss. However, this pullback could be short-lived, if history is any indicator.

More specifically, ACB is now within 3% of its 320-day moving average. Since its inception, there have been five other times when the stock pulled back to this trendline, after which it was higher one month later four times, per data from Schaeffer's Senior Quantitative Analyst Rocky White. In fact, ACB racked up an average one-month gain of 13.3% after these signals.

Daily Stock Chart ACB

From its current perch, a move higher of similar proportion would have Aurora Cannabis stock putting a major dent its current-quarter deficit of 17.5%. However, ACB still boasts a solid 51% year-to-date gain. Longer term though, ACB has a ways to go to nab its Oct. 16 record high of $12.52. 

In the options pits, calls are highly preferred. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) the security has racked up a 10-day call/put volume ratio of 4.73. However, given that short interest increased by 7.1% in its last two reporting periods to 89.46 million shares  -- the most since December -- it's possible some of this call buying could be shorts seeking an options hedge.

Whatever the motive, it's certainly an attractive time to purchase premium on short-term ACB options. The stock's Schaeffer's Volatility Index (SVI) of 52% registers in the 9th annual percentile, signaling relatively muted volatility expectations being priced in at the moment. 

 

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