Why Tilray Bears Could Go Up In Smoke If History Repeats

Tilray Inc TLRY gapped up over 5% higher on Wednesday before dropping down to fill the area and bouncing. After the markets closed on Tuesday, the cannabis giant announced it had acquired a majority stake in amended MedMen Enterprises Inc MMNFF convertible notes for about $165.8 million.

Mergers and Acquisitions may be the topic of conversation for a while as leaders in the sector take out the smaller companies in preparation to dominate the U.S. industry if the country moves forward with federal legalization. In April Canopy Growth Corporation CGC, a main competitor to Tilray, purchased Supreme Cannabis Company in a $345.7 million deal to boost its portfolio and strengthen its cultivation capacity.

The cannabis sector has failed to excite investors recently and the stocks within it have traded in steep downtrends. The sector has historically picked up steam in the fall, however, and Tilray’s stock looks set for a reversal.

See Also: How to Buy Tilray Stock Right Now

The Tilray Chart: Tilray was the target of a short squeeze in February and skyrocketed almost 240% to a high of $67 in just seven trading days before plummeting 52% over the course of two trading sessions and entering into a months-long downtrend.

On June 10, Tilray settled into a descending channel and has been making fairly consistent lower highs and lower lows. On June 27, Tilray bounced off the bottom of the channel near the $12 level and shot up 30% over the following two trading days but slammed into a long trendline that had been holding Tilray’s stock up since October 2020. The trendline is now a resistance level.

On Wednesday afternoon, Tilray looked to be printing a hanging man candlestick. Although Thursday’s candle will be needed for confirmation of the pattern, a hanging man candle could indicate Tilray will trade lower over the coming days. It should be noted consolidation may be needed before Tilray is able to break up from the descending channel.

Tilray is in line with the eight-day exponential moving average (EMA) but below the 21-day EMA with the eight-day trending below the 21-day, which indicates bearish indecision. The stock is also trading below the 200-day simple moving average indicating overall sentiment in the stock is bearish.

  • Bulls want to see increasing bullish volume come into Tilray’s stock to break it up bullishly from the channel. Tilray will then need to regain the 21-day EMA. If it can regain the level as support it has room to move up toward the $15.71 mark.
  • Bears want to see big bearish volume come into Tilray to drop the price down below the eight-day EMA and a support level just below at $13.41. If the stock loses the area as support it could fall toward the $11.87 level.
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