In the first trading session since Aurora Cannabis Inc (TSX:ACB) (OTCQB:ACBFF) (FRA:21P) and MedReleaf Corp. became one, shares held their own today. Following an initial on-open deep dive, prices staged an impressive recovery throughout the day, finishing near session highs. Upon reviewing the price action post-market, it becomes apparent that some big-pocketed buyer(s) staked—or covered—significant positions this morning.
Midas Letter actually floated this very point in an article published yesterday before the close:
With prices now reaching a 6-handle, we wonder how long it will be before large Canadian investment and pension funds start staking significant positions at discounted levels—if they aren’t doing so already.
While we have no indication who those deep-pocketed investors actually were—or bought on behalf of—it’s clear some institution(s) stepped up in a big way. This anecdotal evidence comes via two distinct pathways.
A forensic look on a simple candlestick chart/volume chart gives us primary indication of the depth of buying at-hand. Not only was buying heavy after the opening bell dump took place, it lasted for a lengthy amount of time—well past 11:00am before things settled down. Typically, volume declines markedly after the first half hour or so, reaching a low point by midday.
As we can see, the average median post-open volume was easily 2.5-5x over the run rate of the previous five sessions. Between 265,000 and 520,000 shares traded hands in each 5-minute period, save for one, between 9:55-11:05 this morning. Of the fifteen candlestick bars indicated during that time, only one closed lower than the prior period. Any and all large on-open sell orders were completely absorbed—and then some. Only hyper-capitalized funds and institutional banks have that kind of kinetic buying power.
Just as importantly, Aurora Cannabis did not give back any recovered real estate past 11:00am. After a small fifteen cent pullback following the recovery, volume essentially went limp the rest of the session.
Considering that some 375 million newly-minted shares were eligible to be sold, the lack of post-open selling on the first full day post-distribution is an encouraging sign. It gives us preliminary indication that sellers are exhausted and/or unwilling to chase prices lower throughout the day.
Aurora Cannabis Displays Positive Relative Performance
Although the sector has been desecrated recently, Aurora Cannabis has still lagged its peer group more often than not. Today however, ACB turned the tables in a clear and decisive way.
At its low point, Aurora Cannabis trailed Canopy Growth in negative percentage terms by 2.35:1. Once the post-open buying kicked in, ACB made up the entire difference and displayed net outperformance vis-à-vis WEED by the time three o’clock rolled around.
While ACB has sporadically outpaced WEED in percentage terms on a handful of occasions in July, it has never closed the gap from such a deep trailing position. It’s concrete evidence that large fund and institutional buying was taking place beyond what would be expected from average index and weighted ETF purchasing.
Although these preliminary and subjective datapoints do not constitute absolute proof that sellers won’t regroup, it does paint an optimistic short term technical picture. Bulls not only mopped up huge on-open sell orders with ease, sellers never returned and prices drifted back near the HOD. All this was accomplished with Canopy Growth—and the rest of the sector—skewing lower throughout the day.
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