In recent weeks Wall Street has sown the seeds of love in Sundial Growers (NASDAQ:SNDL). But what are the chances the price affection will sprout green shoots in tomorrow’s portfolios? Let’s examine what’s going on off and on the price chart of SNDL stock, then offer a risk-adjusted determination aligned with those findings.
Apple (NASDAQ:AAPL). Advanced Micro Devices (NASDAQ:AMD). Nio (NYSE:NIO). They’re among last year’s most consistently heavily-traded stocks. Daily volume is often in the hundreds of millions courtesy of day traders, long-term buy and hold investors and everyone in-between. The action also impressively dwarfs those companies actual valuation many times over. Then there’s Sundial.
In good conscience, Sundial Growers can’t be discussed, let alone defended in the same breath as AAPL, AMD or even NIO. Nevertheless, it is a name that many investors are more than simply watching idly and it has our attention.
In the final two months of 2020 Sundial Growers regularly traded 100 million shares a day. That’s right up there with the best of them. SNDL also witnessed more than a handful of volume spikes in excess of 500 million.
Yet the real icing on the cake was Nov. 30 when Sundial traded a stunning 2.05 billion shares. By comparison, a quick look at our other volume leaders reveals less than 400 million shares traded as the single best effort in 2020.
It’s not entirely a fair comparison of course. There is a thing called market capitalization. And in the extreme, Apple’s north of $2 trillion valuation is world’s removed from SNDL’s roughly $350 million.
Still, two trillion’s worth of back-and-forth transactions begs the question, what exactly are SNDL investors smoking to drive that kind of feeding frenzy in shares? It must be something really good, right? Actually, the potential is there.
A Potential Power Shift
In a nutshell, Sundial Growers is a Canadian-based pot play which has caught the attention of investors betting on Cannabis 2.0 under a more relaxed, marijuana-friendly Biden administration. Some of that buzz wore off in the weeks following the election. But Wall Street’s interest has perked up with two Senate seats from Georgia up for grabs today.
A win in Georgia by dems could lead to the decriminalization of marijuana and begin the process of federal legalization. Aside from improved demand, that path would also likely prove a financial boon.
Bottom-line, SNDL is debt-free today after some financial maneuverings. But access to traditional loans and reduced financing costs invariably increase the company’s chances for future sales growth, eventually turning a dime rather than simply selling a dime bag for a loss.
SNDL Stock Daily Price Chart
Source: Charts by TradingView
The daily chart reveals what has already been described with a bit more color and bias towards an upside resolution. As part of SNDL stock’s massive activity of the last couple months, a bullish uptrend has also emerged. Shares have put together a couple higher-high price pivots and higher-lows to form the pattern.
With stochastics trending higher in neutral territory and SNDL not far removed from technical support, it’s unlikely today’s 50 or so cents for admittance will turn into a dime, or more aptly, a ten-bagger, anytime soon.
But on the eve of the Georgia election, I’ve also seen a lot more scary-looking wheeling-and-dealing in today’s market among speculative stocks suitable for more risk-tolerant investors.
On the date of publication, Chris Tyler held, directly or indirectly, positions in Nio (NIO), Advanced Micro Devices (AMD) and their derivatives, but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.