Shares of marijuana stock Tilray (NASDAQ:TLRY) have certainly come off their highs recently. Tilray stock is now down 50% after briefly trading over $100 in early January. No doubt that the euphoria surrounding all things cannabis had gotten out of control and was due for a pullback. The growth prospects, though, remain bright for TLRY and the industry for the foreseeable future. Time for Tliray stock to begin to light it up again.
In my previous post on Tilray stock from March 5, I had a more bearish outlook on TLRY. At the time, Tilray was trading near the $70 level but was struggling to head higher.
Since then, shares have fallen nearly 35% before bouncing at the $44 area. Now that the Tilray stock price has dropped significantly, my opinion has changed as well. Price always matters, especially in momentum names like Tilray.
InvestorPlace contributor Will Healy took a look at TLRY on April 5 and had a negative perspective with shares near $60. In the article, however, he points out several positives along with the massive growth prospects for both the marijuana industry generally and TLRY in particular. These cost of buying into the growth story is much more reasonable now that Tilray is trading at a significantly lower level.
TLRY is looking better on a technical basis. Momentum has turned higher, while the MACD has built a solid base. Its RSI has improved dramatically after reaching oversold levels that marked short-term lows in the past.
The price action from Friday is also reassuring to the bullish case. Tilray failed to make a fresh new low and reversed the downtrend to close sharply higher on the day. This type of pattern is often a sign that the sellers may finally be exhausted and that the buyers are in control. It is even more powerful given the magnitude of the selloff seen in Tilray stock.
Investors looking to add exposure to the cannabis industry should look to add Tilray stock to their portfolio on any weakness. Although TLRY will remain volatile, a move back toward the $70 level appears the most likely case. Selling a January $70 covered call against the long stock position would bring in an additional $4 in option premium to reduce the overall risk by roughly 8%.
Tim Biggam may hold some of the aforementioned securities in one or more of his newsletters. Anyone interested in finding out more about Tim and his strategies can go to https://marketfy.com/item/options-and-volatility.