OGI Stock: A Correction Is Currently in Development
Marijuana legalization in Canada is fast approaching, and the enthusiasm for this sector continues to grow. The cannabis sector is now full of retail investors looking to get rich. This could be a warning sign that speculation is running rampant; a catalyst event like legalization just might end up acting as a buy-on-rumor/sell-on-news event.
In light of this possible selling event, I am focusing on OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI) stock because it is currently testing a very important level of price support. OrganiGram stock’s ability to hold this level of price support will dictate what happens next.
Before I discuss the level of price support, I want to outline the indications that have been supporting the bullish advance in OGI stock.
These indications are highlighted on the following chart.
Chart courtesy of StockCharts.com
This OrganiGram stock chart has been annotated to highlight an alternating wave structure that has been responsible for creating and sustaining a bullish trend.
The alternating wave structure consists of two waves: an impulse wave and a consolidation wave.
The waves highlighted in green on the above chart are impulse waves. These waves capture the stage in a bullish trend when a stock sustains a move toward higher prices, which is why this wave is advancing in nature.
The waves highlighted in purple are consolidation waves. These waves capture the stage in a bullish trend when a stock price corrects and refrains from advancing, which is why this wave is corrective in nature.
The advancing and corrective natures of these waves create the stair-step price action that bullish trends are famous for.
The moving average convergence/divergence (MACD) indicator in the lower panel of the above chart has the propensity to confirm which wave is currently in development.
MACD is a momentum indicator that determines whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices, and bearish momentum implies the opposite.
This is very pertinent information because a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it. This is why the waves highlighted on the OrganiGram stock chart have coincided with the signals generated by the MACD indicator.
Bullish MACD signals have coincided with impulse waves, while bearish MACD signals have coincided with consolidation waves.
The signal generated by the MACD indicator is a confirmation of the wave currently in development. For instance, the MACD indicator is currently in bearish alignment, suggesting that a consolidation wave is in development.
This implies that the stock price is currently correcting. In order to suggest that higher prices via an impulse wave are in development, a bullish MACD cross is needed.
This is relevant because OGI stock is currently testing a very important level of price support. This level of support is highlighted on the following chart.
Chart courtesy of StockCharts.com
This OrganiGram stock chart captures the bullish trend that was created by the wave structure. As I mentioned earlier, the wave structure has created stair-step price action consisting of higher highs and higher lows, which is the quintessential characteristic of a bullish trend.
The uptrend line annotated on the above stock chart was created by connecting the troughs created by the price action.
The uptrend line defines where price support resides, and it is acting as a dividing line between OGI stock’s current bullish trend and a potentially bearish one. What this all means is that, as long as the stock is trading above the uptrend line, I can only assume that a bull market is still in development.
This level of price support is currently being tested. In order to maintain its current bullish position, OrganiGram stock needs to stay above the uptrend line. Falling below it would suggest that the current advance in the stock has run its course, as well as suggesting that a larger correction is in the works.
The bullish trend in OGI stock is currently being tested.
In order to maintain the implications suggested by the trend, OrganiGram stock needs to find its footing above price support (which currently resides at $4.25) and then follow it up with a bullish weekly MACD signal.