Say No to This Weed Stock

Tilray was nearing overbought territory heading into today

The last time we checked in with Tilray Inc (NASDAQ:TLRY), it was New Years Eve, and options traders were blasting the weed stock's recent bottom. Fast forward three weeks, and TLRY has rallied into a trendline that has historically bearish implications for the next month.

More specifically, Tilray stock is trading within one standard deviation of its overhead 80-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, two similar run-ups to this trendline have occurred in the last three years. One month after these signals, TLRY was lower by an average of 25.6%, with both returns negative.

At last check, Tilray stock was up 4% to trade at $21.29, so a drop of similar magnitude would mean nearly all of the stock's 27.3% year-to-date gain would be erased by next month. Year-over-year, the shares have taken almost a 72% cut. And if that's not enough, TLRY's 14-Day Relative Strength Index (RSI) currently sits at 64, on the cusp of overbought territory -- further reinforcing the case for an imminent pullback.

Among options traders, there's a big appetite for calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TLRY's 10-day call/put volume ratio is perched at 6.84 and ranks 1 percentage point from an annual high. However, considering a whopping 48.2% of the equity's total available float is sold short, its possible some of these calls could be shorts hedging against any upside risk.