With increasing legalization of recreational marijuana across multiple US states, cannabis stocks had a very strong bull run in 2020, with many stocks multiplying in value many times over.
One of these companies is Trulieve Cannabis (CSE: TRUL) (OTC: TCNNF) who’s stock rallied from its all-time-low ($8) in March last year to $67 in February this year, a massive 640% increase in only 11 months.
However, since putting in the all-time-high, the stock started to slide and is now down almost 50% since February.
One reason contributing to this sell-off is that the CEO’s husband stands on trial for federal bribery and corruptions charges. Even though he’s not involved with the company, the market clearly has shown concerns about if the company might be negatively impacted by this.
But this has not stopped CEO Kim Rivers from ‘buying the dip’ with a big $1 million insider purchase on August 17th, increasing her stock position in the company by 4.5%, something that communicates strong confidence from the company’s management side.
In terms of the business itself, Trulieve Cannabis currently has 97 dispensaries across the US with 88 of those being in Florida and currently is in the process of acquiring MSO Harvest Health & Recreation.
This deal will give the company access to 15 more dispensaries in Arizona, further increasing the company’s reach and profits potential.
Additionally, the company also recently secured a medical cannabis license in Georgia which is a populous state and close to Florida where Trulieve has the majority of its current infrastructure.
The company is also highly profitable, reporting a net income of $40.9 million in Q2, more than double that of the year-ago quarter.
Given all this, do we think Trulieve Cannabis is a buy?
The answer is yes, but not at current price levels as the price action for now suggests there is more downside to come. In our technical analysis below, we share what we think is a good price range to potentially start accumulating shares.
Technical Analysis
As already mentioned, the stock is down 50% since its ATH’s in February. Price is currently holding at a minor support, but price action overall looks weak/heavy, suggesting further downside mid-term unless the order flow clearly changes from bearish to bullish, something we’re not seeing yet.
Thus, if this mid-term bear trend continues lower, we think that the long-term key support between $20 to $24 can offer a great opportunity to acquire shares of this profitable company at a discount.
Option Positioning
Being a Canadian stock, we do not have options data on TRUL.
FULL DISCLOSURE: Chris Capre currently has no stock or option position in TRUL. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.
