Aurora Cannabis (ACB - Get Report) shares were roughly flat in midday trading on Wednesday but they have put together a solid rally, climbing 3.3% following a somewhat disappointing quarter.

Perhaps investors are willing to give the company a pass on its wider-than-expected loss after it grew revenue 367% year over year to C$75 million. This came in well ahead of estimates calling for C$67.5 million. However, Aurora lost about C$160 million in the quarter, equating to a loss of 16 cents per share. Analysts were only looking for a loss of 5 cents.

That said, management said it expects the company to generate positive EBITDA in the fourth quarter, giving investors a ray of hope that profitability will eventually show itself. Still, for a stock toting an $8.5 billion valuation and with revenue this small, there isn't much room for error.

Worth mentioning is that Tilray (TLRY) also reported earnings on Tuesday. While shares opened higher, they are down about 4.5% on Wednesday, adding a little more volatility to the cannabis sector. 

Trading Aurora Cannabis Stock

Daily chart of Aurora Cannabis stock.
Daily chart of Aurora Cannabis stock.

Late last week, Aurora Cannabis stock broke below $8.50. With shares trying to move higher on Wednesday, it would be constructive for ACB stock to close above this mark. If it can't, we could see this former level of support turn into resistance, increasing the odds of testing lower prices.

Should Aurora close over $8.50, we won't have to wait long to get a sense of where Aurora Cannabis stock is going next. Shares will either have to break out over downtrend resistance (thick blue line) and the 20-day moving average, or they will be squeezed against $8.50. Should it fail to hold, $8 is back on the table.

If resistance gives way and ACB stock is able to rally, it sets up a test of the 50-day moving average up near $8.87. Above that mark and we can look for a possible retest of prior uptrend resistance (thin blue line).

If support gives way and Aurora stock falls, there are a few key levels to note. The first is $8, which is this week's closing low and Wednesday morning's opening prices. Below that and Aurora has its 50% retracement at $7.44, which is about where the 200-day moving average comes into play as well. Should we get a breakdown to this area, the reaction to this level will very key to watch. Should the 200-day fail as support, the 61.8% retracement is down near $6.76.

Here's the bottom line: Watch $8.50. Above it and ACB stock can attempt a breakout. If it's resistance, it puts $8 back on the table and possibly lower if shares come under further pressure.

Read What Our Real Money Contributors are Saying About Investing in Cannabis

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.