OrganiGram Holdings Inc Displays Noteworthy Relative Strength

Benjamin A. Smith
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In an impressive display of strength, Organigram Holdings Inc (CVE:OGI) (OTCMKTS:OGRMF) (FRA:0OG) stormed back from the severe morning selloff gripping cannabis stocks to finish green. The strong price action could portent good things for the New Brunswick-based cannabis LP should today’s selloff be but a momentary blip. Judging the way Big Cannabis is moving after hours on the back of Tilray’s 2Q 2018 results, Organigram could have an absolute field day tomorrow.

The obvious element which stood out is aggregate price. While the Horizons Marijuana Life Sciences Index ETF (HMMJ) closed down ↓4.53% despite a moderate midday bounce, OrganiGram never broke stride. The stock closed up $0.20 to $6.10/share (↑3.39%), and marched relentlessly upwards once the broad sector rally attempt got underway.

Taking a closer look at the market forensics, it’s apparent OGI had few motivated sellers in the morning session. In terms of individual strength in a lousy cannabis environment, OrganiGram checked all the boxes.

Starting with the gap down itself, OrganiGram was already flashing relative strength signals from the get-go. While peers such as CannTrust Holdings Inc. and Aphria Inc. careened lower by double-digits, OGI never relinquished more than ↓5.26% beyond the opening 5-minute candle. Early session volume was a quarter of yesterday’s level, failing to meet even a diminished 30-period MA standard after 10:00 am. As the sector recovered, OrganiGram out-performed once again, never dipping below the 20-EMA and finishing right at the session highs. It is crystal clear investors were not selling the sector dip, and buying everything once the rally commenced.

Zooming out a little bit further, there appears to be further upside for OrganiGram to run. Volume is still very strong, the 20-period RSI is still showing room for extension in the low 70’s, and today minted a new record closing high in a correcting market. Just about every relevant ancillary indicator screams “buy”, while the stock remains below overbought thresholds. That’s a recipe for further upside price extension.

Furthermore, with Tilray poised to open up by double-digit percentage gains as consolidation/FOMO mania grips the sector, OrganiGram is the quintessential participation candidate. Not only does OGI stack up favorably in terms of top line sales/revenue growth/cost of sales metrics, but it too should be considered a prime candidate to partner-up with Big Alcohol or Big Pharma. This particular bubbly-type atmosphere is conducive for quality and profitable LPs like OrganiGram to pare the valuation gap with competitors.

CEO Greg Engel discusses their third quarter financial results and key factors allowing Organigram to be competitive with all cannabis corporations in the industry

Ultimately, I wonder if investors won’t begin to look at OGI differently considering the incredible price extension competitors like Tilray are undergoing down south. Of course, the valuation gap between the two doesn’t make sense, and much of it is driven by U.S. investment flow herding, tight share structure and the like. We all get that. But it will be interesting to see if OrganiGram can make a big statement move here—despite its more limited investment profile on the Toronto Venture Exchange.

After all, it’s hard to argue the fundamentals don’t warrant it in this particular FOMO-type environment.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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