Say No to This Weed Stock

TLRY has run up to a historically bearish trendline

by Patrick Martin

Published on Jan 21, 2020 at 12:43 PM
Updated on Jan 21, 2020 at 4:32 PM

The last time we checked in with Tilray Inc (NASDAQ:TLRY), it was New Years Eve, and options traders were blasting the weed stock's recent bottom. Fast forward three weeks, and TLRY has rallied into a trendline that has historically bearish implications for the next month. 

More specifically, Tilray stock is trading within one standard deviation of its overhead 80-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, two similar run-ups to this trendline have occurred in the last three years. One month after these signals, TLRY was lower by an average of 25.6%, with both returns negative.

Daily Stock Chart TLRY

At last check, Tilray stock was up 4% to trade at $21.29, so a drop of similar magnitude would mean nearly all of the stock's 27.3% year-to-date gain would be erased by next month. Year-over-year, the shares have taken almost a 72% cut. And if that's not enough, TLRY's 14-Day Relative Strength Index (RSI) currently sits at 64, on the cusp of overbought territory -- further reinforcing the case for an imminent pullback.

Among options traders, there's a big appetite for calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TLRY's 10-day call/put volume ratio is perched at 6.84 and ranks 1 percentage point from an annual high. However, considering a whopping 48.2% of the equity's total available float is sold short, its possible some of these calls could be shorts hedging against any upside risk.


A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Research Exposes Shortcut to Stock Market Wins
A simple way to stop picking losers, and start cashing in like Wall Street's elite.
Google Postpones Android Reveal, "Now is Not the Time to Celebrate"
"Now is not the time to celebrate," Google said in a message on its website
ZNGA Zooms to 8-Year High on Billion-Dollar Deal
ZNGA is planning to buy Peak for $1.8 billion
Huge New Legal Marijuana Market Has Shortage Crisis
250 million Europeans have access to medical marijuana. There's already a shortage....