Aurora Cannabis Inc. (ACB) shares rose more than 10% during Monday's session, breaking out from prior resistance at around $7.50 to fresh reaction highs. Call option volume outpaced put option volume ten to one in early trading, as traders appear confident that the cannabis rally will continue into February after a strong rise in January. Canopy Growth Corporation (CGC), Tilray, Inc. (TLRY) and other cannabis companies also moved higher during the session.

On Friday, Canopy Growth CEO Bruce Linton told CNBC that the company could make billions in the United States if cannabis becomes legal on a federal level. The comments sparked hopes that many Canadian licensed producers, including Aurora Cannabis, would be well positioned to enter the U.S. market and become dominant players with their significant production capacity and established brands. And even without the U.S. market in the near term, many analysts believe that licensed producers could see further upside ahead.

Technical chart showing the share price performance of Aurora Cannabis Inc. (ACB)

From a technical standpoint, Aurora Cannabis stock broke out from prior resistance at around $7.50 and $8.00 to trendline and R1 resistance levels near the $8.00 mark. The relative strength index (RSI) moved into overbought levels with a reading of 72.70, and the moving average convergence divergence (MACD) continues to trend higher. These indicators suggest that the stock could see some near-term consolidation, but the intermediate trend remains higher.

Traders should watch for some consolidation between $7.50 and $8.00 before another potential move higher. A close above R1 resistance at $8.13 could lead to a move higher to R2 resistance at $9.17 and ultimately a retest of prior highs of $12.52 over the longer term. If the stock breaks down from $7.50, traders could see a move lower to trendline and 200-day moving average support levels near $7.00, although that scenario appears less likely to occur.

The author holds no position in the stock(s) mentioned except through passively managed index funds.