The cannabis sector has seen an uptick in volume this week, which has helped many of the stocks to begin to rebound after almost a full year of steady decline. High volume indicates a high level of trader and investor interest, which means those who have left the sector may be finding cannabis stocks attractive again.
Aurora Cannabis Inc ACB, Canopy Growth Corporation CGC, Cronos Group, Inc CRON and Tilray, Inc TLRY are trading down 61%, 76%, 47% and 81%, respectively, from their February highs. If history repeats, however, the cannabis sector may start to heat up again toward the end of the year, as it did in 2020 and the early part of 2021.
As traders and institutions begin to drive the price of a stock up the (mostly) institutional traders who have an open short position are forced to cover. This drives the price of the shares up further and is known as a short squeeze. If stocks within the sector continue to see upwards momentum, there is a possibility a short squeeze could play out on these four stocks due to their underlying statistics.
The Aurora Short Data And Chart: Aurora has a 198.04 million share float of which 34.75 million shares are held short, meaning 17.54%. The number is down from 38.33 million in September. 19.71% of Aurora’s shares are held by institutions.
Aurora printed a big bullish Marubozu candle on Monday, which indicated higher prices were likely to come on Tuesday. The stock then printed a bullish hammer candlestick on Tuesday and was able to surpass Monday’s high-of-day, which may indicate higher prices will come again on Wednesday.
The Canopy Growth Short Data And Chart: Canopy Growth has 31.78 million, meaning 12.67%, of its 250.67 million share float held short. The number has increased from 28.3 million in September. Canopy also has a high level of insider and institutional ownership, with insiders owning 36.29% and institutions an additional 16.73%.
Canopy Growth started the week with a big bullish engulfing candlestick followed by a hammer candlestick on Tuesday, which surpassed Monday’s high-of-day. By midafternoon the stock busted through a resistance level at $13.35. Traders will want Canopy Growth to close the trading day above the level.
The Cronos Short Data And Chart: Cronos has a float of 195.8 million shares and 17.88 are currently held short, meaning 9.23%, compared to 17.76 million in September. Cronos has the highest level of its shared locked up by insiders and institutions with insiders owning 47.24% and institutions an additional 17.6% for a total of 64.84%.
Cronos printed a big bullish kicker candlestick on Monday, which should have indicated higher prices would come but on Tuesday the stock fell almost 16% lower on high bearish volume. At midafternoon Cronos was attempting to hold above a support level of $5.63. Consolidation of the volatility may be needed in the form of an inside bar on Wednesday.
The Tilray Short Data And Chart: Tilray has a 441.5 million share float and 38.89 million are held short, meaning 8.8%, down from 38.96 million in September. Tilray has the lowest level of ownership with just 16.35% of its shares held by insiders and institutions.
Like Cronos, Tilray printed a big bullish kicker candlestick on Monday but on Tuesday the stock was holding much of its gains and working to create a bullish inside bar pattern on the daily chart, on higher-than-average volume. The daily candlestick is likely to be a doji if Tilray closes the trading session near its opening price. Traders will want to watch for a break of the inside bar pattern on Wednesday.
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