Chart of the week: A stock poised to thrust higher
Its chart is similar to bitcoin's, but this a textbook pattern with the trend now firmly up.
24th June 2019 13:16
by John Burford from interactive investor
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Its chart is similar to bitcoin's, but this a textbook pattern with the trend now firmly up.
Is Tilray going for a high?
Tilray (NASDAQ:TLRY) is a major legal marijuana producer and supplier that is part of the first wave of the so-called 'pot stocks'. These companies have rapidly become a big force in the market and at least one trading platform offers a Cannabis Index comprising a basket of pot stocks.
At first, I simply watched the markets for these shares as they resembled typical aspects of a bubble. I wanted to see how they reacted to the first signs of trouble in their industry before making any move. If major hurdles appeared, such as the blanket refusal of governments to legalise the industry, then bulls may have had to wait a long time for the political climate to change.
But in fact, it appears authorities are now falling over themselves to submit to public pressure to legalise the crop, especially for medical applications. And that means opportunity.
Tilray has suffered of late from a host of problems, but now I believe is poised to advance from recent lows.
Here is the daily chart showing the spike high to the September top at $300:
Source: interactive investor Past performance is not a guide to future performance
The exponential surge post-IPO to that $300 high marks it as an unsustainable bubble – and the 21-month correction to the recent $35 low was the pay-back for the bulls' over-exuberance. And 21 months is a very long time to wait for a sign of a recovery. But I feel we have one now. Here is the 4-hour chart of recent action:
Source: interactive investor Past performance is not a guide to future performance
I have a textbook lower tramline marking accurate hits on the lows, a five-wave pattern down to the final fifth wave on a momentum divergence. Loyal readers may recognise this set-up as identical to that in British American Tobacco in my COTW of January 28.
From the $35 low, it has rallied to my upper parallel trendline at $50. The move appears to be impulsive, which means the trend is now up, and a clear thrust above the upper line would likely send it towards my first target around the $65 - $70 zone.
I believe the $35 low will hold on any set-back. And will the old high of $300 be seen again? Now, that would be a high!
For more information about Tramline Traders, or to take a three-week free trial, go to www.tramlinetraders.com.
John Burford is the author of the definitive text on his trading method, Tramline Trading. He is also a freelance contributor and not a direct employee of interactive investor.
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