Canopy Growth Stock Crumbles After Quarterly Report

The weed stock is fighting multi-pronged resistance levels

Deputy Editor
Jun 1, 2021 at 12:33 PM
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The earnings spotlight was on the cannabis sector this morning, after Canopy Growth Corporation's (NASDAQ:CGC) mixed fiscal fourth-quarter report. The company announced much wider-than-expected losses per share, as well as revenue that was line with estimates. CEO David Klein stated that the company is a "little concerned" with Covid-19 headwinds lasting into the next quarter, especially as reopening in Canada remains uncertain. 

In response, Canopy Growth stock was last seen down 4.1% to trade at $25.02. CGC has been slipping on the charts since its Feb. 10 two-year high of $56.49, recently hitting a May 13 six-month low of $21.72 and battling its year-to-date breakeven level. Fresh off four-straight monthly losses, overhead pressure at the 40-day moving average appears to be keeping a lid on the shares as well, a trendline that emerged as resistance after a late-February bear gap.

CGC 0601

Options traders are chiming in today, with volume running at double what's typically seen at this point. So far, 22,000 calls and 9,270 puts have crossed the tape. The weekly 6/4 26.50-strike call is the most popular, followed by the 26-strike call in the same session, with new positions being opened at the latter. This shows plenty of options traders anticipating a rally from CGC by the contracts' expirations at the end of this week. 

Analysts are overwhelmingly bearish on the Canadian pot stock, leaving plenty of room for a shift in sentiment should CGC rally. Of the 15 analysts in coverage, 12 carry a "hold" or worse rating, with the remaining three a "strong buy." 

Lastly, the security's Schaeffer's Volatility Scorecard (SVS) ranks at 93 out of a possible 100, implying the stock tends to outperform these volatility expectations -- a boon for option buyers. 


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