In his first Executive Decision segment of Tuesday's "Mad Money" program, Jim Cramer spoke with Darren Lampert, co-founder and CEO of GrowGeneration Corp. (GRWG) , a hydroponic products retailer.
Lampert said GrowGeneration is continuing its strategy of acquiring and revitalizing hydroponics retailers across the country. He said every deal it does produces results immediately, with same-store sales rocketing once GrowGeneration adds its staff, selection and service to the location.
GrowGeneration is about more than just cannabis, Lampert added. Controlled environmental agriculture is growing in popularity across the country and because it is so specialized and technology-intensive GrowGeneration is seeing little in the way of competition.
We looked at the charts of GRWG back on March 26 and wrote, "It seems like the fundamental story and the technical story are not on the same page. I like it when things work together. It gives me greater confidence. I would stand aside from GRWG for now."
Let's check on how the charts look today.
In this daily bar chart of GRWG, below, we can see that prices have been in a declining mode since the middle of February. Prices are trading below the declining 50-day moving average line but above the rising 200-day line. The 200-day line was tested earlier this month. The On-Balance-Volume (OBV) line has also declined from February, telling us that sellers of GRWG have been more aggressive. The 12-day price momentum study in the lower panel shows a low in March and a higher low in May even though prices made lower lows. This is a bullish divergence as the pace of the decline has slowed. This divergence is an early warning signal that prices could improve in the days and weeks ahead.
In this weekly Japanese candlestick chart of GRWG, below, we see a mixed picture. Prices are still above the rising 40-week moving average line, but the line is being tested. Two large lower shadows stand out as prices neared the $35 area. This rejection of the lows is encouraging. The weekly OBV line has declined since February but appears to be stabilizing this month. The MACD oscillator is above the zero line but pointed down. The oscillator is poised to begin narrowing.
In this daily Point and Figure chart of GRWG, below, we can see a potential upside price target in the $47 area.
Bottom line strategy: We previously recommended standing aside of GRWG, but now the charts have improved enough to return to the long side with a $32 stop. The $47 area is our price target for now.