Organigram Holdings Inc: Awaiting the Next Signal in OGI Stock
OGI Stock: Bounce Off Support
Licensed marijuana producers like Organigram Holdings Inc (CVE:OGI) continue to be a popular topic of conversation. There always two different sides to every story, and these contradictory views trend to create an overwhelming amount of volatility.
Rumors have begun to swirl that the government may hold off marijuana legalization until 2018, versus the expected 2017 deadline that was previously proposed. This news is causing some to step away or outright avoid this entire sector, as such news could send all these speculative stocks cascading lower.
At the same time, I am hearing supportive arguments that this new segment of the economy could dwarf the alcohol and tobacco markets, as billions of dollars in projected sales are entering the equation.
I am not going to speculate with regards to the merits of either of these arguments, I will just stick to what i know, and that is the OGI stock chart.
I have outlined in my previous reports that I believe the “buy on rumor, sell on news” mantra is fueling this move higher in OGI stock and other licensed marijuana producers. I believe this fuel will continue to create a bullish tailwind until the government finally announces the details behind legalization and the recreational market.
This mantra has fueled the rise in Organigram stock, and during the entire run, higher price has remained constructive.
These constructive patterns are the basis on which the price has surged higher, and I believe the best course of action is to remain patient until such a pattern develops.
In my previous report, I outlined how a potential top had developed in OGI stock and that support around $2.30 was needed to hold in order for a constructive pattern to develop.
Two days later, Organigram stock hit a low of $2.38 and instantly rebounded off that level.
The following Organigram stock chart illustrates the reason why I outlined this level of price support.
Chart Courtesy of StockCharts.com
The first level of price support is the horizontal trend line, highlighted in purple. The trend line represents the previous all-time high in OGI stock. This level was first attained in August 2014 and it took 26 months before this price level was revisited and overtaken.
It has been acting as a level of support ever since the price broke above it, and the recent correction in the price bounced right off this level, highlighted by the trend line.
The second level of support is the uptrend line, highlighted in blue. This line is created by connecting the troughs on the price chart.
The bull market in Organigram stock is dependent on price remaining above this trend line, and as long as OGI stock is trading above this trend line, I will be on the lookout for constructive patterns.
Both of these trend lines are converging around one price, so it is not a surprise that support has acted to reject any further price weakness.
The following Organigram stock chart illustrates the constructive behavior that has dominated the bullish trend towards higher prices.
Chart Courtesy of StockCharts.com
The run in the price has been healthy and constitutive. The impulse wave, highlighted in green, has taken the price to progressively new highs, while the consolidation waves alleviate overbought conditions and set the framework for the next impulse wave to develop.
Impulse waves take only a little time to play out, while consolidation patterns take a longer time to. It’s as if the price attempts to lull investors to sleep right before a run is about to begin.
This price action is extremely bullish and it is what I look for when I scan for potential investments. The 50-day moving average has supported shares since the trend began to accelerate higher, and the price has continued to remain above it.
I am still awaiting a constructive setup pattern to develop in order to be more conclusive that a new impulse wave will develop.
Bottom Line on OGI Stock
Organigram bounced off of support and although a constructive pattern has yet to develop, the opportunity for one is still available. The fact that support held and a fierce bounce quickly developed has increased my optimism that the bullish run in OGI stock might have some life left.