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How to Trade Tilray and Aphria as Volatility Ramps Up

Tilray and Aphria have been two of the leaders in the recent cannabis stock rally. Can they stay there? Let's look at the charts.

Cannabis stocks have been trading all over the map. Tilray  (TLRY)  climbed 50% on Wednesday. On Thursday, shares were down 40%.

To say that Tilray has been volatile almost seems like an understatement at this point.

Aphria  (APHA)  isn’t much better. Shares have fallen 30% on the day after climbing as much as 36% on Wednesday and almost doubling in the first three days of this week.

The cannabis space has been red hot this year, as the group gathered momentum in January. M&A action has helped to fuel the move as well, with Aphria and Tilray agreeing to a merger.

Jazz Pharmaceuticals  (JAZZ)  scooping up GW Pharma  (GWPH)  helped too.

One thing's for certain - volatility will continue to pick up. Particularly as Aurora Cannabis  (ACB)  is gearing up for earnings after the close of trading Thursday.

Let’s look at some charts.

Trading Aphria

Daily chart of Aphria stock.

Daily chart of Aphria stock.

Aphria’s volatility is clear, with shares eclipsing $31 on Wednesday and breaking below $20 on Thursday.

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So far, the 10-day moving average is acting as resistance, as shares attempt to hold up above the prior all-time high from 2018 at $19.87.

If it can do so, look for another run up toward $24, then a push back toward $30. If Aphria can’t hold up over $19.87, keep an eye on the 10-day moving average.

Below that measure puts Thursday’s low in play, down at $17.61. Losing that mark could put the $13 to $14 area in play, which was resistance when Aphria was consolidating its gains last month.

Trading Tilray

Daily chart of Tilray stock.

Daily chart of Tilray stock.

Like Aphria, Tilray has been all over the place. I want to see it hold near this area, though.

It has the 10-day moving average just below Thursday’s low, while a key multi-year level sits near $34. If it holds, Shares could easily bounce back into the mid-$40s and possibly the $50s.

Knowing how far these stocks can rebound is hard to know until the rebound is actually playing out.

On the downside, a break of $34 could put prior uptrend resistance in play (blue line), followed by the 21-day moving average and the 2020 high near $23.

A break of all of these marks could put the 50-day moving average on the table, but at that point, the bull run might be over. We’ll need to re-evaluate Tilray in that scenario.