APHA Stock: This Is Where I Draw the Line on This Stock
Aphria Inc (NYSE:APHA) is the marijuana stock that continues to make headlines. In December 2018, a short seller’s report came out alleging that the company and its insiders had committed fraud. Investors obviously did not take kindly to this report and, as a result, APHA stock suffered substantial losses, leaving it battered and bruised.
The steep discount that Aphria stock was trading at as a result of this sell-off did not go unnoticed by its competitors, because later that same month, news broke that Green Growth Brands Inc (OTCMKTS:GGBXF, CNSX:GGB) was interested in taking over the company via a hostile takeover bid.
It was an all-stock offer worth roughly $8.00 a share. The reaction to this news was surprisingly muted because although APHA stock did appreciate, it was nowhere near the $8.00 price point.
Aphria stock is currently trading at roughly $6.92. This is off the lows that were set in December following the short seller’s report and below Green Growth Brands’ hostile take over bid worth $8.00.
The current price is extremely significant because, from a technical perceptive, APHA stock is testing a significant level of price resistance. This level of price resistance is highlighted on the following Aphria stock chart.
Chart courtesy of StockCharts.com
The APHA chart above illustrates that a significant level of price resistance resides at $7.00.
Prior to being a level of price resistance, the $7.00 price point was a significant level of price support. For instance, in April 2018 and August 2018, Aphria shares found price support at this level and higher prices ended up prevailing each time.
In December 2018, following the short seller’s report, this level of price support was shattered. When a significant level of price support is broken, it becomes a new level of price resistance.
This level of price resistance has become a very important inflection point because when Aphria stock broke below it, this event also completed a technical price pattern known as a double top.
A double top is a trend reversal pattern characterized by two peaks of roughly equal size that are separated by a trough in between.
The double top highlighted on the chart above illustrates that this trough resided at $7.00. When APHA stock broke below it in December, this event completed the pattern, suggesting that the bullish trend that began in December 2014 had finally run its course. As a result, a bearish trend had taken its place.
In order to negate the bearish implications suggested by the double top, APHA stock needs to break back above this level of price resistance.
The hostile takeover bid by Green Growth should have been the catalyst to accomplish this task. Unfortunately, this takeover bid fell well short. Perhaps this was an indication that investors were not taking the all-stock takeover bid as being serious.
The next potential catalyst is scheduled for January 11, 2018, when Aphria is set to report earnings. Investors are hoping that there will be some clarification that will put to bed the allegations that were put forward against the company. Perhaps that will finally give the stock a bump and get it trading back above $7.00. Only time will tell.
The bottom line is that in order for the bulls to rejoice, Aphria stock needs to break above $7.00 and maintain its footing above it.
Aphria stock is testing a significant level of price resistance that resides at $7.00. In order to restore its bullish posturing, APHA stock needs to break above this level of price resistance and maintain its position above it. Failing to do so will continue to suggest that lower prices are likely to prevail.