Cannabis stocks have been getting smoked. Still, with Aurora Cannabis (NYSE:ACB) reporting this evening, can the tide be turned? Let’s see what Wall Street is expecting from ACB stock and what’s required on the price chart before investors can buy shares with increased odds for longer-term profits.
Cannabis stock investors coming into this week’s earnings season have continued to feel the burn in a big way. Wednesday was a disaster after producer Cronos (NASDAQ:CRON) reported weak and disappointing quarterly results.
Worse yet, in early Thursday, trade peers Tilray (NASDAQ:TLRY) and Canada’s largest player Canopy Growth (NYSE:CGC) are reinforcing the bear case.
In brief, existing anxieties tied to oversupply problems, regulatory red tape, weaker-than-expected demand, rising costs, declining margins and disappearing road maps toward profitability have only grown larger. And painful price declines in CRON, CGC, TLRY and others are a reflection of today’s increased fears, disappointment and frustration with cannabis stocks.
Now it’s ACB stock’s turn at the earnings altar. Aurora is set to release its results after the close of trade on Thursday.
In front of Aurora stock’s Q1 confessional, Wall Street is forecasting sales to explode by 220% year-over-year. That’s the good news, if any. More important for Canada’s second largest producer, pricing and margins on products sold and lack of profitability are going to be scrutinized by Wall Street. And as InvestorPlace’s Vince Martin notes, it’s a numbers problem for ACB stock.
Ultimately, there’s nothing to suggest ACB has an ace up its sleeve this evening. Still, given the damage, is it time to start growing a position in Aurora stock? Despite the stock shedding nearly 75% from its October 2018 all-time-high and a decline of nearly 40% this year, the price chart is still saying otherwise.
ACB Stock Weekly Chart
It has been a couple of months since Aurora Cannabis stock could even be labeled a speculative buy on the price chart. Technically, all the cards for the bull case were off the table in September. This is true after a challenge of 62% and long-standing angular support failed a weekly candlestick higher-low pattern. And conditions have only grown worse for ACB investors.
This week, shares have broken lower from a flag pattern stationed beneath the less important 76% Fibonacci level. At the same time, an oversold stochastics is now readying to form a bearish crossover. The net takeaway is oversold conditions in ACB stock (and other cannabis stocks for that matter) will produce more painful lows in the coming weeks. The trend is your friend in Aurora stock, but only if you’re comfortable with short exposure.
My position is that ACB stock isn’t even worth a small allocation within investors’ portfolios.
But what if ACB stock can become the next Microsoft (NASDAQ:MSFT) or Amazon.com (NASDAQ:AMZN) within the cannabis market? The “dot-com” bust certainly wasn’t kind to those market leaders either, right?
I suggest staying out of harm’s way. At the end of the day, there is a lot of work to be done before and if a meaningful bottom is formed and more thoughtful Aurora Cannabis stock investors might eventually be rewarded.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
