You Ask, We Analyze: The Bull And Bear Case For Sundial Growers Stock

Zinger Key Points
  • Sundial is likely to bounce up higher because the stock’s RSI has been measuring in near the 30% level since May 9.
  • Bearish traders can watch for Sundial to print a reversal candlestick below the most recent lower high.

On Sunday evening, Benzinga asked its followers on Twitter what they’re buying at the open on Monday. From the replies, Benzinga selected one ticker for technical analysis.

@JustaLowlife03 is buying Sundial Growers, Inc SNDL.

Sundial was surging over 10% higher in the premarket on Monday, ahead of its first-quarter financial results, which are set to print after the market close.

When the cannabis-based pharmaceutical company printed its fourth-quarter results on April 27, the stock gapped up slightly higher the next day, but closed that session down about 4%. For the quarter that ended Dec. 31, 2021, Sundial reported revenues of CA$22.7 million, an increase of 63% over the same period the year prior. For the first quarter, analysts estimate the company will see revenues of CA$22.72 million.

On May 3, BMO Capital bumped the stock from Underperform to Market Perform and raised the price target from $0.60 to 70 cents.

Sundial can be a volatile stock despite its massive 2.38 billion share float, and has squeezed short sellers a number of times over the past year. Most recently, Sundial soared about 97% over just nine trading days between March 15 and March 25, to reach a high of 89 cents.

Since then, Sundial has been trading in a sharp and steep downtrend, plummeting 61% to reach a low of 34 cents on Thursday, before closing slightly higher on Friday.

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The Bull Case for Sundial: From a technical standpoint, Sundial is likely to bounce up higher because the stock’s relative strength index (RSI) has been measuring in near the 30% level since May 9. When a stock’s RSI reaches or falls below that level, it becomes oversold, which can be a buy signal for technical traders. When Sundial’s RSI reached 30% between Jan. 21 and Jan. 27, the stock surged 56% to reach a high of 66 cents on Feb. 11.

  • Sundial is also likely to bounce higher to form at least its next lower high in the downtrend. The most recent lower high was printed May 4 at the 49-cent mark. If the stock fails to surge up above that level on a run-up into earnings or as a positive reaction to the print, bullish traders can watch for Sundial to print a higher low above the 34-cent level to indicate a trend change is about to take place.
  • Sundial has resistance above at 45 cents and the 55-cent mark.
  • The Bear Case for Sundial: Bearish traders can watch for Sundial to print a reversal candlestick, such as a doji or shooting star candlestick below the most recent lower high, which could indicate the downtrend will remain intact. The stock may also have difficulty holding above the eight-day exponential moving average, which has been pushing Sundial lower since April 4.
  • Conservative bearish traders who aren’t already in a position may choose to wait and see if Sundial creates another lower low before entering into a short position. Sundial hasn’t traded below $0.34 since November 2020.
  • Sundial has support below at 32 cents and $0.29.

Price Check: Shares of Sundial were trading 13.98% higher on Monday morning at $0.44, according to Benzinga Pro.

See Also: How to Read Candlestick Charts for Beginners

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