OrganiGram Holdings Inc (CVE:OGI) And Comparative 2019 Blue Sky Breakout Performance
It may have taken Organigram Holdings Inc (CVE:OGI) (OTCMKTS:OGRMF) (FRA:0OG) three attempts, but blue sky breakout (BSB) territory finally arrived. Today’s gains continue a string of impressive performances that have OGI investors feeling positively giddy.
When the closing bell rang, OrganiGram tacked on another $0.44 to $9.09 (↑5.09%), busting through the previous high of $8.87/share on a closing basis to attain blue sky breakout status. Previously during this bullish impulse, OGI had only reached intraday all-time highs before settling back on-close. When the opening bell rings tomorrow, OrganiGram will be trading without any established price overhang restricting its movement; new resistance will be geometric and fluid.
As upside price resistance and targets are now subjective, we can only guess what follows. But we can approximate what comes next by analyzing how other major cannabis stocks have fared during their blue sky breakouts in 2019. While this remains just guesswork, it gives a rough estimate of the kind of gains investors can expect before the rally fizzles.
The criteria for the examples was as follows:
- Market cap above $400M fully-diluted at the time of the breakout
- All-time highs attained in 2019, during this current and prolonged bullish sector impulse
Village Farms International
If there’s one blue sky breakout OrganiGram wishes to emulate, its that of Village Farms International. The stock blasted through its all-time high of C$9.80 on February 15th to close at $11.12, and hasn’t looked back. At today’s close of $14.93/share, VFF is ↑55.61% from the previous all-time high, and ↑37.14% on a blue sky breakout closing basis ($11.12). On a peak-to-trough basis, returns chime-in at ↑65.81% and ↑46.13%, respectively.
Perhaps the most impressive part is that the Horizons Marijuana Life Sciences Index ETF (HMMJ) has only risen ↑7.65% during this period. Clearly, a positive news cycle and analyst coverage has helped propel VFF’s share price well above industry norms.
Aside from having approximately 1/3 less shares outstanding, Village Farms could be the most apt comparable to Organigram, since its BSB is so recent and has transpired during a similar low volume sector melt-up phase.
Another high-profile BSB occurring in 2019 is that of Cronos Group. After reaching that designation on January 21st, CRON proceeded to rip ↑48.47% on a closing basis—peaking at C$30.57/share—over the next ten sessions. Even after the inevitable cool-off consolidation phase, Cronos Group is only a couple of dollars away from reaching new closing benchmarks.
CRON continues to display great underlying price action strength that belies its fundamentals.
Charlotte’s Web Holdings
Blue sky breakouts haven’t been confined exclusively to Canadian operators in 2019. Although the resulting surge wasn’t as pronounced, Charlotte’s Web Holdings tacked-on decent gains of its own in the days following its BSB on January 25th.
Over the next six sessions, CWEB rose ↑17.13% on a closing basis—peaking at $22.35/share—before buyer’s exhaustion settled-in. The current bearish impulse has brought prices back below the original BSB level—closing today at $18.98/share.
Technically, U.S. vertically integrated operator Cresco Labs has conducted two blue sky breakouts over the past 10 weeks. The first occurred on December 28th, 2018, but didn’t go very far. Prices only rose ↑2.77% on a closing basis (the session after), before embarking on a month-long narrow band consolidation.
However on February 19th, Cresco Labs broke through again; its second attempt at BSB grandeur produced better results. Prices rose ↑13.65% on a closing basis by February 28th, resting just a few cents off those levels today. CL is in strong technical position to keep pushing higher should the sector maintain relative strength.
It’s worth noting that both Charlotte’s Web and Cresco Labs list on the Canadian Securities Exchange, with much tighter share structures than OrganiGram’s current float.
Based on the results of four major cannabis blue sky breakouts in 2019, the odds favor additional material gains in OrganiGram Holdings over the next several sessions. On the high end, Cronos Group surged ↑48.47% on a closing basis, while the worst performer—Cresco Labs on BSB iteration #1—rose a paltry ↑2.77%, though never threatened to break under the previous all-time high. The average gain of all five BSB mentioned is ↑23.83% on a BSB closing basis, which is where OrganiGram starts tomorrow’s session. That’s a pretty good track record of success.
Furthermore, OGI continues to outperform the sector (HMMJ) at large. We noted on February 26th that, “There’s not much evidence suggesting it can’t (continue to run), given that OGI has appreciated almost 3-times faster than Horizons Marijuana Life Sciences Index ETF (HMMJ) over the past 1/3 month periods.”
For the time being, we’re sticking with that thesis. Until HMMJ starts dishing new pivot lows on the hourly ($21.56), we believe odds are conducive to further upside extension.
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