Organigram Holdings Inc: This Will Light the Next Move in OGI Stock

Marijuana Stock
Photo:Drew Angerer / Staff / GettyImages

OGI Stock: It Has Arrived

I have not kept my feelings and views surrounding Organigram Holdings Inc (CVE:OGI) stock and all the other marijuana licensed producers that make up this new speculative growth sector a secret.

In my previous report on Organigram, I outlined what I believe is driving investors into this sector, and I am probably starting to sound like a broken record. I continue to believe that a bull market in this sector will continue to develop up until the day that the government finally announces the details surrounding marijuana legalization and the recreational market that will follow.

Anticipation of this event is causing all the mania surrounding this sector. Once this news is finally delivered, I believe that the music will stop and investors will head for the exits. This is a classic “buy on rumor, sell on news” event.

This speculative event has caused hot money to flow into this sector and, as a result, wild swings in OGI stock have become a common occurrence. For many, this type of price action can take a toll on one’s emotions. I believe this type of price action is probably best suited for day traders. This is why I have always said it is best to wait for a constructive pattern to develop before committing any capital to a position.

A constructive pattern works great in such turbulent market conditions because it gives me the ability to define my risk. Knowing when to exit my trade if the price moves against me is the single most important factor I always look for.

Luckily for me, the bull market in OGI stock has been very constructive, so waiting for a pattern to develop has not been too difficult and, as time has progressed, the interval between constructive patterns has begun to contract.

I am happy to say that the constructive pattern I have been seeking may have finally arrived.

The following Organigram stock chart illustrates the constructive price behavior that has defined this bull market.

ogig

Chart courtesy of StockCharts.com

The Organigram stock chart above is a perfect example of a healthy and constructive price pattern. The chart is littered with impulse waves and consolidation waves. An impulse wave, highlighted in green, takes the price to a progressively new high, while the consolidation wave alleviates the overbought conditions that was created, and also sets the framework for the next impulse wave to develop.

This pattern of wave succession has continued, and it is the reason why I believe that another constructive consolidation wave was set to develop on the Organigram stock chart.

In late summer, the trend began to accelerate when OGI stock crossed above the 50-day moving average. This moving average is similar to the 200-day moving average because it also acts as a diving line but, on a shorter time frame. Trading above it is bullish, and trading below it is bearish.

The 50-day moving average has acted as a level of support since late summer, and any attempts to trade below that level has resulted in investors stepping in with buying pressure supporting Organigram stock at that level.

In my previous report on Organigram stock, I outlined how I was waiting for a constructive pattern to develop and, since that time, such a pattern has decided to grace me with its presence.

The following Organigram stock chart illustrates a constructive pattern that has just developed.

ogig1

Chart courtesy of StockCharts.com

After OGI stock found support at $2.40, an impulse wave quickly developed that took the price higher and allowed a consolidation wave to develop. This consolidation wave is the constructive pattern I was waiting for. Depending on which way the price breaks out of the consolidation pattern will depict the direction of the next impulse wave.

A breakout higher would suggest that OGI stock could trade higher to test resistance at the previous all-time high at around $4.49. A break down lower would suggest that the lower prices were set to prevail; this would also mark the first time in this rally that a consolidation pattern broke to the downside.

Bottom Line on Organigram Stock

The bullish price action on the Organigram stock chart continues. The long-awaited constructive price pattern that I have been looking for has finally emerged. This pattern could be used to effectively design a trading strategy around OGI stock.