Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) and Aurora Cannabis Inc (TSX:ACB) (OTCQB:ACBFF) (FRA:21P) lead a surge in large cap cannabis issues today (MLCCI ↑3.63%), continuing a trend of inflows into Tier-1 entities. Both stocks were among the strongest individual Canadian cannabis entities valued over $500 million.

Starting with the sector leader, Canopy Growth continues to dazzle. While the stock has been noticeably outperforming its peers over the past few sessions, today that strength became abundantly clear.

Canopy started out the session by announcing a multi-year agreement with Neptune Wellness Solutions to provide extraction, refinement, and extract product formulation capacity. While the deal should help Canopy’s position in the extraction/softgel market, it wasn’t the impetus for an additional $400 million in market cap pouring into the name. Today’s move was almost entirely technical related.

As we explained yesterday, investors had been heavily buying the dips over the past few sessions. This strength carried Canopy Growth to its second post-NYSE listing high close above $40/share. As we speculated, investors would begin purchasing WEED/CGC in droves as the price veered towards $44/share, giving perhaps one last real opportunity to purchase the stock within its pre-legalization boundaries. As it turns out (quite frequently, I might add), our thesis was spot-on:

“Not only would further established resistance be absent, $44/share would represent the last chance for investors to buy Canopy within the pre-legalization range… It’s quite possible (even probable) investors may act accordingly by panic buying shares as the all-time high rapidly approaches.”

With Canopy Growth securely within striking distance to its all-time high, the next question is how much resistance the stock faces at $44/share. From a bull’s perspective, the meeker the better; should the glass ceiling break quickly, $50/share could come in short order. More drawn out resistance would lessen the odds of that event happening in the short term.

Canopy Growth closed higher by $1.88 to $42.53/share (↑4.62%) on volume that was about ↑93.75% higher than the 3-month median average on the Toronto Stock Exchange. As well, CGC established a new NYSE benchmark closing high of $32.05/share, and $32.88/share intraday.

Investors bid up shares in rival Aurora Cannabis accordingly. The company did experience some peripheral news, as merger partner MedReleaf Corp. announced Q4 and year end fiscal 2018 results. But again, this had no bearing on share price today. Earnings reports have regularly been dismissed by cannabis investors at this stage of the growth cycle.

Aurora Cannabis Inc. CCO Cam Battley on earnings, Aphria and More

Aurora Cannabis strength can be attributed to overall investment interest at the top end of the market. There’s clearly an emerging trend where the Tier-1 cannabis stocks—and to a lesser degree, the mid-major cannabis stocks—are outperforming their junior brethren. We’ve written about why this phenomenon is likely to occur post-legalization, and industry leaders like Vic Neufeld have elucidated on this topic in-depth.

In essence, there’s an emerging flight to quality taking place. Leaders where volume production, distribution agreements and access to capital are cemented should dominate over their meeker and disadvantaged competitors. Certainly, Aurora Cannabis fits that description and reaping the leeward side of investment flows.

Generally, the lower in market capitalization one heads, the worse the stock performance has been of late. But that certainly isn’t a problem for both Canopy Growth and Aurora Cannabis, who are trading like they’re immune to the uncertainty overhanging many of their competitors.