Tilray Inc. (TLRY) is in the news again thanks to word of a product research deal with AB inBev (BUD) and it is our Stock of the Day. Let's check out the charts and indicators for the cannabis company to see if the early strength in the name here on Thursday can be sustained in this difficult market environment.
In this daily bar chart of TLRY, below, we can see the price action through Wednesday's close. Tilray was up about 11%, at around $79, shortly before the opening bell Thursday. We do not have a lot of price history to work with, but what we have is very interesting. TLRY had a parabolic rise in August and September and a rapid decline. Prices have worked lower but with a few bounces. The 50-day moving average line turned bearish in late November and prices would need to rally above $110 to break this indicator.
The thing that is very interesting is the movement in the On-Balance-Volume (OBV) line. The OBV line rises quickly with the price action but does not peak until early October, after the price peak. Since October the OBV line has only declined slightly, which suggests there was strong buying on the way up and only minimal liquidation or selling on the decline. Longs either have a good location or deep pockets. In the lower panel is the 12-day price momentum study, which shows a higher low from November to December. This tells me that downside momentum has slowed, which may be happening because someone is buying during the decline. This bullish divergence could be foreshadowing a rally ahead.
In this Point and Figure chart of TLRY, below, we can see the big rally and the big decline. An upside price target of $118 is projected, and if achieved would put TLRY above the 50-day moving average line.
Bottom line strategy: Is TLRY and perhaps a number of other cannabis stocks ready to rally again? Maybe.