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Where Will Tilray's Stock Find Technical Support?

April 4, 2019 3:16 pm
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While most cannabis stocks have had huge rallies so far in 2019, Tilray Inc (NASDAQ:TLRY) has been left in the dust. Aurora Cannabis Inc (NYSE:ACB), Aphria Inc (NYSE:APHA) and GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) are all up more than 65 percent year to date, while Tilray is down 12.5 percent in 2019.

Tilray bulls received more bad news this week, with the stock dipping to new 2019 lows. Here’s a look at what the charts are saying about Tilray’s technical picture and where the stock may finally find support.

Near-Term Breakdown

Unfortunately for Tilray bulls, the stock lost a major potential technical support level in recent weeks. Tilray bounced off the $64 level in both December and early March, giving bulls hope the stock had finally found support. Unfortunately, Tilray broke below $64 on April 1 and hasn’t made it back above that level since.

To make matters worse, the Tilray breakdown was part of a bearish descending triangle pattern that has been months in the making. A descending triangle is formed when a stock has a negatively sloped resistance line pinching a horizontal support line. Ultimately, the resistance line typically pushes the stock below its support level, which is what happened to Tilray this week.

Once a descending triangle breakdown occurs, the previous support level ($64) transitions to resistance, suggesting it will be difficult for Tilray to make it back above $64 in the near term.

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Long-Term Downside

Tilray doesn’t have a long history on the U.S. market to generate a longer-term technical picture, but there’s one glaring technical problem that stocks out like a sore thumb in the stock’s one-year chart. Tilray first listed on the Nasdaq last year at around $23 per share. It quickly got caught up in the cannabis stock market hype, which drove shares as high as $300 in intraday trading in September of last year.

Unfortunately, the stock’s meteoric rise happened so fast that it made a jump from around $45 to above $50 in late August and never looked back. This big jump left a gap in Tilray’s chart that was never filled, and technical traders know these gaps rarely stay open indefinitely. To close the gap, Tilray shares would need to trade down to around $45, roughly 26 percent additional downside from Thursday’s trading level.

Key Levels To Watch

The near-term technical good news for Tilray traders is that the stock’s recent breakdown has pushed its RSI into oversold territory at 28.3. That low RSI means Tilray shares could bounce a bit next week.

One key level traders need to watch is $64. Unless the stock closes above $64 and stays there, there’s very little to like about it from a technical perspective.

On the downside, there’s not much to like in terms of support until Tilray gets to $45. If the stock does bounce next week, wherever it bottoms will be the only potential near-term support level, but it’s unlikely to hold in the medium term.

The stock traded around $61.20 per share at time of publication.

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