Wondering whether you should buy some pot tomorrow? Let’s look at Tilray (TLRY). (November 13, 2018)
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I want to look at a couple pot stocks here; first Cronos ( NASDAQ: CRON ). They reported earnings and the stock gapped down, and then, not surprisingly, traded up. This is the new bubble; when I say this is the new bubble, maybe I am being a little flippant but here’s the deal: As you know if you have watched any of my videos or heard any of my commentary about the pot stocks, the cannabis industry, I really don’t know anything about it.
I know there is more to it than smoking it and listening to Pink Floyd, The Dark Side of the Moon, but then that is just me. I don’t know much about the industry. I know the stocks are very, very much overvalued but so was Amazon ( NASDAQ: AMZN ) when it first started trading; look at that now. I just want to look at the price action here. There is a lot of retail interest in this; people are into these things, kind of like they are Tesla ( NASDAQ: TSLA ), the same deal, it’s more of a religion. This stock gapped down to the 200-day moving average and then traded up. So I look at this as actually bullish even though it closed down.
Here’s the stock that I am getting to, Tilray ( NASDAQ: TLRY ). I watched to see how this stock traded when they reported earnings after the bell just a little while ago, I am doing this video at 4:35 Eastern time. I watched to see how they traded and this is what I want to highlight. The first move on these earnings trades is almost always wrong, that’s just the way it is.
Here we have had several wrong moves. The first move is down, I thought it went to 105.00; it’s a little bit lower at least on BATS. So it falls down, everybody is selling. And then, oh crap, everybody is buying, some sad sack bought it up here at 116.50 or so and then he’s is probably the same guy that sold it down here at 105.00 and then bought it back at 111.00 so that he could make the next move higher, which didn’t happen, and so now he is doing this.
The bottom line is, you’ve got buyers and sellers, this is just the way the retail market goes; they are always on the wrong side of the trend because they are buying or selling after the move is obvious. That’s the point that I want to make. After the move is obvious, when a stock ramps up 10 percent, that’s not when you buy it. You want to buy the stock before it ramps up 10 percent.
Now, how can you do that? Well, that’s why making money in trading can be hard; because it is easy to say, tougher to do. Kind of like Steve Martin’s old routine, his old gag, I wrote a book called How to be a Millionaire, the first chapter, Get a Million Bucks. It’s the same way here, buy low, sell high. Well, how do you do that? You have to have some kind of methodology to use. One of my methodologies is, I don’t buy stocks after hours, I just don’t.
I was looking at this, and I will be honest with you, I was tempted to buy it here when it got to 105.00 and then held but I didn’t. So I am watching the stock, this is a 1-minute chart, and then it runs up here above the close. I am thinking, well, you know, maybe I should have bought it. No, not going to do that, I don’t buy stocks after hours. And then when it is up at 115.00 I definitely thought, maybe I should buy it. No, I don’t buy stocks after hours. Then the stock is down at 105.00 and I thought, well, this is why I don’t buy stocks after hours.
So with all this yammering that I am doing, and you are looking at the stock trading, this is a total crapshoot, this is a total crapshoot. Well, here’s what’s not a crapshoot: The stock is trading down today. By the way, Cronos ( NASDAQ: CRON ), they lost money but they didn’t lose as much as people thought they were going to lose. Okay, fine. Cronos ( NASDAQ: CRON ) was down today, but it traded up.
When I look at Tilray ( NASDAQ: TLRY ), here’s what I want to do: The stock closed today at 111.55. I would say this, if the stock, tomorrow, trades above 111.55 I think this is a stock that you can buy. Because after earnings and everybody is waiting to see what they are going to do, if the stock starts trading above today’s close and the only difference between now and when the stock closed was that we know what the earnings were. The stock right now is trading down. Those earnings are being factored into the stock price after hours.
And so what we want to see is what happens when the market opens tomorrow. Are buyers coming in for the stock knowing what they know about earnings? If they are they will take the stock above today’s close, again, 111.55. If they’re NOT then they will NOT take the stock above today’s close at 111.55. So I really look at this as kind of a line in the sand, a line of demarcation. This dictates whether you buy or whether you don’t buy.
Whether you short the stock, that’s really more of an opinion that I don’t want to render right now because the stock is in a little bit of a no man’s land here. So above 111.55, I’ll say 111.60, go ahead and buy this stock. If it doesn’t hit that, don’t. You can put that in your pipe and smoke it.
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