Pot Stock Butts Up Against Historically Bearish Trendline

The 30-day moving average could add pressure on Tilray stock

Lillian Currens
Jul 28, 2020 at 11:43 AM
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The marijuana sector is still trying to prove itself, with some names a bit more successful than others. One stock that has struggled to bounce back from its mid-March trough is Tilray Inc (NASDAQ:TLRY). The security's latest rally attempt was snubbed by the descending 100-day moving average, which has helped guide shares down to a 56% year-to-date deficit. Though the equity is attempting to topple this moving average today, last seen up 6.1% at $7.82, it is running into resistance near a historically bearish trendline that could add pressure on the charts. 

The trendline in question is TLRY's 30-day moving average. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, a similar signal has flashed five times in the past three years. The security was lower one month after three of these signals, averaging a negative return of 6%. A similar move from its current perch would put TLRY just above the $7 level. 

TLRY July 28

Today's climb is attracting plenty of options bulls. So far, 63,000 calls have exchanged hands, which is double the intraday average. The two most popular contracts by far are the weekly July 8-strike and 7.50-strike calls, with positions being opened at both. 

Digging deeper, options players have been overwhelmingly bullish lately. In the last 10 weeks, 20.66 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- a ratio that stands higher than all but 2% of readings from the past year.

Analysts haven't been as enthusiastic, with only two calling the security a "strong buy." Meanwhile, eight say "hold," and two say "sell." Should TLRY continue its plateau, it could be ripe for a round of price-target cuts. What's more, the stock's 12-month consensus price target of $8.81 is a 13.1% discount to current levels. 


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