A couple of weeks ago
we took good profits in Organigram Holdings, fearing that it may be forming a Double Top with its early August highs. Now it looks like it is in order to buy it back in the expectation of a breakout to new highs, for the following reasons; at the time we sold we were not fully aware of the magnitude of the November 8th vote on the legalization of marijuana which is taking place in no less than 8 states, and anticipation of a positive outcome of the votes should continue to be a driver for the sector as this date approaches. The other reasons for considering Organigram a buy again here are technical – for we can see on its 6-month chart below that it has held up well since we sold, hovering not far beneath its early August highs and draining off overhanging supply at resistance near to this high. The volume pattern has continued positive, with upside volume greatly in excess of downside volume driving the On-balance Volume line higher as the price has moved sideways in a narrow range in recent weeks, and the price tending to close near to its highs in recent days. Whilst it is true that there is still some risk of a sharp drop due to the large gap with the 200-day moving average, this risk is believed to be mitigated by the factors we have just considered, so that this is now thought to be the setup for a sharp breakout to new highs, similar to what we saw in Select Sands (SNS.V) yesterday, although not as dramatic, which we correctly anticipated early in the week.
It is therefore considered to be in order to buy back Organigram immediately. It is only a little above the price where we sold a couple of weeks, and we have not had to shoulder the risk of a drop during this period. To guard against the adverse consequences of this failing and dropping hard, possible loss may be limited by setting a stop at, say, C$1.49. Shares outstanding 84 million, with a float of 54 million.
Organigram Holdings
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Organigram Holdings Inc OGI.V, closed at C$1.69 on 29th September 16.
Posted at 7.40 am EDT on 30th September 16.