Chart Wars: Between Sundial And Tilray, Which Marijuana Stock Could Smoke Shorts First?

Sundial Growers Inc SNDL was trading slightly higher on Wednesday, while Tilray, Inc TLRY was trading down about 2%.

The overall sector has been all but demolished since the high times of 2018, when Canada legalized cannabis at the federal level, and the beginning of 2021, when President Joe Biden’s inauguration led many to believe federal legalization in the U.S. may be on the horizon.

Sundial has plummeted 96% from its Aug. 1, 2019 all-time high of $59.25, while Tilray has plunged about 98% from its Sept. 19, 2018 all-time high of $300. Even though the stocks shot up again in February 2021, with Sundial reaching a high of $3.96 and Tilray soaring up to the $67 level on Feb. 10, the sector has failed to sustain any long-term bull cycle.

Unless the U.S. decides to legalize cannabis federally, there is likely little in terms of news that could help the sector make a meaningful reversal. However, the stocks are beginning to show some characteristics that could make them candidates for a short squeeze.

Tilray comes in as a better candidate for a squeeze, with 13.78% of its float held short, compared to Sundial, which has 11.7% of its float held short.

Sundial has settled into two bullish patterns on its chart, which could make it a better play for technical traders.

It should be noted, however, that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.

In The News: Next month, Senate Majority Leader Chuck Schumer (D-N.Y.) is expected to file his bill to federally legalize marijuana, which has widespread support.

In 2021, a Gallup poll revealed a record 68% of respondents said they support the national legalization of cannabis. Recreational marijuana is currently legal in 18 states and Washington, D.C.

See Also: Tilray Stock Forecast 2025: Where Are Shares Of The Cannabis Co. Headed?

The Sundial Chart: On Wednesday, Sundial was continuing to trade in what is now a triple inside bar pattern, with the mother bar created on Feb. 24 and a series of three inside bars on the trading days since.

• The triple inside bar pattern has been created on decreasing volume, which indicates consolidation and the formation leans bullish because Sundial was trading higher before printing the pattern. Traders can watch for a break up or down from the previous day’s candlestick to gauge future direction.
• The inside bar pattern could also be shaping up into a bull flag pattern, and if it is recognized the measured move of a bullish break is 16%, which indicates the stock could trade up toward the 57-cent level.
• Sundial has resistance above at 55 cents and the 64-cent mark, and support below at 45 cents and the 32-cent level.

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The Tilray Chart: Tilray is trading in a confirmed downtrend on the daily chart, with the most recent lower high created on Feb. 25 and $6.23 and the most recent lower low formed at the $5.43 level on Feb. 24.

• On Wednesday, Tilray fell toward $5.59 where bulls came in to buy the dip, which caused the stock to form a lower wick. If Tilray closes the day above the $5.70 level, it will print a hammer candlestick, which could indicate a reversal to the upside is on the way.
• If Tilray can rise up above the Feb. 25 high-of-day, the downtrend will be negated.
• Tilray has resistance above at $5.90 and $6.46 and support below at $5.15 and $4.71.