Is Tilray Still A Bear Play Or Will Shorts Go Up In Smoke?

The cannabis sector has burned to ashes over the past few months with Canopy Growth Corporation CGC making a new 52-week low and Tilray Inc TLRY trading in a downtrend that that may bring it there.

On Oct. 7, the cannabis giant reported 43% growth year-over-year but missed consensus estimates. Tilray briefly popped following its earnings print but the bulls weren’t strong enough to buck the downtrend and the bears pushed the stock lower still.

Short interest on Tilray’s stock has increased recently with 38.96 million shares, meaning 8.82%, of Tilray’s 441.38 million share float held short. The number is up from 34.15 million in August.

See Also: The Benzinga Cannabis Capital Conference: Be There Or Be Square — It's All Happening In New York

The Tilray Chart: On Sept. 23, Tilray broke up bullishly from a falling channel but entered into another falling channel, making a fairly consistent series of lower highs and lower lows. On Monday the stock slammed into a support zone at the $10.16 mark and on Tuesday the stock retested the level and bounced.

The backtest of the level as support may have created a bullish double bottom pattern on the daily chart. If the pattern is recognized, Tilray may be set to bounce up and break through the upper descending trendline of the channel, although high bullish volume will be needed.

On Tuesday Tilray was working on printing a bullish inverted hammer candlestick. An inverted hammer is found at the bottom of a downtrend and can trigger a bullish reversal. Subsequent price action will be needed to confirm whether the pattern was recognized.

Tilray is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The stock is also trading below the 200-day simple moving average, which indicates overall sentiment is bearish.

• Bulls want to see big bullish volume come in and break Tilray up from the falling channel formation which would allow the stock to regain the eight-day EMA as support. The stock has resistance above at $11.03 and $12.54.
• Bears want to see big bearish volume drop Tilray down below the $10 level, which would cause the stock to print a lower low and confirm the downtrend is intact. Below the level, Tilray has support at $9.51.