You Ask, We Analyze: Why Sundial Growers Stock Could Slam Short Sellers

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

@dyals_style and @Smith19222 are buying Sundial Growers, Inc SNDL.

Sundial was trading almost 36% higher at one point in the premarket after printing its third-quarter earnings. The Canadian cannabis company reported net earnings of $11.3 million compared to a net loss of $71.4 million for the third quarter the year prior. Sundial’s board of directors also approved a share buyback program to repurchase up to CA$100 million worth of its outstanding common shares.

The big bullish reaction to Sundial’s earnings print could fuel a short squeeze intraday due to the company’s underlying statistics. Although Sundial has a massive 2.06 billion share float 297.23 million shares, meaning 14.43%, are held short. The number has increased from 286.34 million in September.

See Also: 18 Stocks Moving In Friday's Pre-Market Session

The Sundial Chart: Sundial has been trading in a steep downtrend since June 3 after the stock was the target of a short squeeze and shot up over 105% higher over the course of seven trading days. After reaching a high of $1.48 the stock made a months-long series of lower lows and lower highs until reaching an Oct. 6 bottom of 61 cents where it began to trade sideways.

On Thursday, Sundial closed up 6% but was unable to break above a resistance level at the 72-cent mark despite above-average volume. Intraday, 164.15 million shares exchanged hands compared to the average 10-day volume of 106.42 million. When a stock sees above-average volume it indicates there is a high level of trader and investor interest.

If Sundial opens the trading day above the 75-cent level it will print a higher high above the Oct. 21 high-of-day, which would be the first indication the stock may reverse into an uptrend. A higher low will be needed in the future for confirmation, however.

Sundial is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 50-day simple moving average, which indicates longer-term sentiment is bullish.

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• Bulls want to see big bullish volume help Sundial to hold its premarket gains and then for the stock to consolidate on lower volume to power up for a move higher.
• Bears want to see big bearish volume enter Sundial’s stock to drop it down to fill the lower gap Sundial will have on the chart.