On Sunday evening, Benzinga asked its followers on Twitter (NYSE:TWTR) what they’re buying at the open on Monday. From the replies, Benzinga selected one ticker for technical analysis.
@JustaLowlife03 is buying Sundial Growers, Inc (NASDAQ: SNDL).
Sundial was surging over 10% higher in the premarket on Monday, ahead of its first-quarter financial results, which are set to print after the market close.
When the cannabis-based pharmaceutical company printed its fourth-quarter results on April 27, the stock gapped up slightly higher the next day, but closed that session down about 4%. For the quarter that ended Dec. 31, 2021, Sundial reported revenues of CA$22.7 million, an increase of 63% over the same period the year prior. For the first quarter, analysts estimate the company will see revenues of CA$22.72 million.
On May 3, BMO Capital bumped the stock from Underperform to Market Perform and raised the price target from $0.60 to 70 cents.
Sundial can be a volatile stock despite its massive 2.38 billion share float, and has squeezed short sellers a number of times over the past year. Most recently, Sundial soared about 97% over just nine trading days between March 15 and March 25, to reach a high of 89 cents.
Since then, Sundial has been trading in a sharp and steep downtrend, plummeting 61% to reach a low of 34 cents on Thursday, before closing slightly higher on Friday.
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The Bull Case for Sundial: From a technical standpoint, Sundial is likely to bounce up higher because the stock’s relative strength index (RSI) has been measuring in near the 30% level since May 9. When a stock’s RSI reaches or falls below that level, it becomes oversold, which can be a buy signal for technical traders. When Sundial’s RSI reached 30% between Jan. 21 and Jan. 27, the stock surged 56% to reach a high of 66 cents on Feb. 11.
- Sundial is also likely to bounce higher to form at least its next lower high in the downtrend. The most recent lower high was printed May 4 at the 49-cent mark. If the stock fails to surge up above that level on a run-up into earnings or as a positive reaction to the print, bullish traders can watch for Sundial to print a higher low above the 34-cent level to indicate a trend change is about to take place.
- Sundial has resistance above at 45 cents and the 55-cent mark.
- The Bear Case for Sundial: Bearish traders can watch for Sundial to print a reversal candlestick, such as a doji or shooting star candlestick below the most recent lower high, which could indicate the downtrend will remain intact. The stock may also have difficulty holding above the eight-day exponential moving average, which has been pushing Sundial lower since April 4.
- Conservative bearish traders who aren’t already in a position may choose to wait and see if Sundial creates another lower low before entering into a short position. Sundial hasn’t traded below $0.34 since November 2020.
- Sundial has support below at 32 cents and $0.29.
See Also: How to Read Candlestick Charts for Beginners
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