Just when I thought that perhaps marijuana producers were due for a pause—that perhaps the volatile price action would give me a chance to catch my breath—Aphria Inc (CVE:APH) stock did it again as it just registered another large move, closing the day up seven percent.
I should not be surprised that there is still life in Aphria stock because the bullish premise remains intact. Every day that passes means we are one day closer to legalization. The madness and mania that surrounds this sector is set to continue until that day finally arrives.
I had mentioned in my previous report on Aphria that, due to the volatility and the possibility that an interim top had developed, it would best to wait for a constructive pattern to develop on the stock chart. The run higher in APH stock was littered with constructive patterns; even the sell-off that ensued on the days following the questionable top remained constructive as the price found support exactly where the chart suggested support would be found.
I stand by my opinion that, as long as the price remains constructive, the highs that were visited on November 16, 2016 could be revisited and potentially surpassed.
The following Aphria stock chart illustrates how the price has remained constructive during the latter part of this rally.
Chart courtesy of StockCharts.com
The APH stock chart above illustrates that, after a volume spike marked an interim top, the price quickly found support. The level at which the price found support was exactly where Aphria stock needed to find support, and it suggested that a constructive pattern could develop.
The purple horizontal trend line on the chart above labeled “Support” is where APH stock bounced off, and it halted any further selling pressure. If the price fell below this level, I would have reason to believe that a larger decline was in play.
This level represents a previous area of resistance that contained the price for approximately four weeks. The trading range that developed underneath resistance was the constructive pattern that set up the run that caused APH stock to double in short order.
Now that this level of resistance has been broken, it becomes a level of support, and it is not uncommon for a price to return and test this level from above before the new trend higher can resume.
In order for APH stock to challenge and create new highs, a constructive pattern suggesting higher prices needs to develop, and that is exactly what the trading action on November 30, 2016 suggests.
The following Aphria stock chart illustrates the constructive pattern that executed on November 30.
Chart courtesy of StockCharts.com
The chart above illustrates that after resistance was broken in early November, an impulse wave, highlighted in green, propelled APH stock to new highs. A downtrend quickly developed and, in the process, the previous level that had acted as resistance was tested as support. Aphria stock bounced off of this level in dramatic fashion and hasn’t looked back.
The downtrend had contained the price for the duration of 10 days and, on November 30, the price rose above the trend line. The breakout marks the point where the trend line was broken but, due to the nature of the pattern and the short duration, I would like to see a higher high develop that would take the price above $5.80 in order to confirm that a new trend higher is developing.
Bottom Line on APH Stock
Aphria stock remains constructive, and a potential bullish pattern was just generated. This suggests that APH stock can run further, and that the door to test the previous high—and potentially surpass it—is wide open.