TLRY: The secular bull market potential of pot
In bear markets when volatility is high, so many stocks tend to have a correlation of 1 to the S&P 500 making it very hard to find stocks bucking the trend. Frequently, the only place to find secular bull markets in these environments are in penny stocks or biotech stocks that are in the midst of creating something new and marketable.
With the advent of new legislation sweeping North America to legalize pot, an entirely new sector has emerged: marijuana stocks. TLRY, which IPOed this summer was subject to an insane first few months as it rocketed from $17 to $300 in 2 months. Pot bulls cheered the ability to invest in this untapped industry (at least legally) while bears suggested that these companies have high costs, no earnings, only potential, and were way overvalued. I actually agree with both camps on this one.
My ambivalence aside, that doesn't stop me from wanting to buy a stock that has broken a downtrending channel on good news and that is exactly what TLRY did on Friday. Illustrated in the chart above, TLRY has broken a 3 month long channel on the back of news that Privateer Holdings (Peter Thiel's fund) would not be selling any shares when its lock-up period on 76 million IPO shares expires on Tuesday of this week. I believe many investors and short-sellers were targeting this lock-up period as a time of turmoil for the stock. It seems with this announcement that the bears have been stymied.
I believe this is good enough news (both technically and fundamentally) to buy TLRY with the following parameters:
Buy TLRY under $100 ($96 as of Friday's close)
Target 1: $114
Target 2: $140
Stop: $83
This stock trades quickly. I would recommend using a trailing stop as well.
With the advent of new legislation sweeping North America to legalize pot, an entirely new sector has emerged: marijuana stocks. TLRY, which IPOed this summer was subject to an insane first few months as it rocketed from $17 to $300 in 2 months. Pot bulls cheered the ability to invest in this untapped industry (at least legally) while bears suggested that these companies have high costs, no earnings, only potential, and were way overvalued. I actually agree with both camps on this one.
My ambivalence aside, that doesn't stop me from wanting to buy a stock that has broken a downtrending channel on good news and that is exactly what TLRY did on Friday. Illustrated in the chart above, TLRY has broken a 3 month long channel on the back of news that Privateer Holdings (Peter Thiel's fund) would not be selling any shares when its lock-up period on 76 million IPO shares expires on Tuesday of this week. I believe many investors and short-sellers were targeting this lock-up period as a time of turmoil for the stock. It seems with this announcement that the bears have been stymied.
I believe this is good enough news (both technically and fundamentally) to buy TLRY with the following parameters:
Buy TLRY under $100 ($96 as of Friday's close)
Target 1: $114
Target 2: $140
Stop: $83
This stock trades quickly. I would recommend using a trailing stop as well.
Trade active:
Was able to purchase shares down in the premarket @ 94
Trade closed: stop reached:
Stopped out. That being said, this could test the top of the channel break out around $74 and move higher.