Aphria Inc (TSE:APH) (OTCMKTS:APHQF) (FRA:10E) is among the highest shorted stocks on the Toronto Stock Exchange, according to recent data. In conjunction with a late-stage hourly consolidation pattern which appears ready to break, a significant move could be close at-hand. Midas Letter takes a closer look.

The timely short interest data comes courtesy of data analysis provided by Elben Capital, based on reported data to IIROC by each individual marketplace where trades were marked as short sales. As of September 17th, Aphria had the 4th largest short position on the TSX, based on net notional short sale value. This equates to approximately $777.49 million in Aphria stock earmarked as sold short. Surprisingly, that was a ↑73.79% increase over the prior fifteen day reporting period, despite the fact that Aphria is considered a foremost candidate in the Big Beverage sweepstakes. Apparently, some aren’t too convinced.

Parsing the numbers further, some $330.13 million of newly-initiated short sales have materialized since September 3rd (through the 17th). If we calculate the median closing price in the ten trading sessions during that time, we arrive at $19.92/share. By dividing the net notional short value by the median closing price, we surmise that Aphria has added some 16,572,791 shares short to the ranks—give or take a million—since the beginning of the month alone.

Top 5 Largest Short Position on the TSX ($ Notional Value)

On a percentage basis, it means that approximately 6.79% of Aphria fully-diluted share structure (244 million) has been shorted over the past two weeks—an extraordinary amount. Of course, the actual tradable float is significantly lower, making the extreme short interest increase ever more weighty.

Overall, it’s pretty safe to assume Aphria’s aggregate short interest (SI) is sitting well into the double-digits. If we afford a generous median collective short price of $18.50/share, (remember APH came into this reporting period with $447.36 million of net notional short value already on the books—much of it, presumably, obtained at lower pre-rally prices), then we can surmise Aphria likely has some 42,000,000 (+/-) million shares currently short. That works out to about 17.21% of Aphria’s fully-diluted share structure short.

Whether the actual number is that high is unclear. But it’s safe to say there’s enough latent kerosene lying around to spark a stampede higher under the right flammable conditions. The same goes for Canopy Growth Corp. and Aurora Cannabis Inc., both with SI levels pushing into double-digit territory (if not there already). But given Aphria’s immense surge in notional short interest since the latest reporting period, and higher SI percentage overall, there’s a little more jet fuel supporting a potential APH breakout.

Aphria’s Price Action Signaling A Material Move Is Imminent

As we can glean from the chart, there’s much to observe from an hourly perspective. Prices are currently in the middle of its September range, roughly spanning $17.20 on the low end, to $22.00 on the high end. The controlling price action during this consolidation phase is defined by clear higher-low and lower-high areas, in which the former appears to have the upper hand. This most recent cluster of selling (orange) has had a more muted downside effect than the previous round, making us wonder how much ammunition bears have left.

With the short interest piling up and sector sentiment still powerful (The Horizons Marijuana Life Sciences Index ETF – HMMJ – attained new record highs on strong volume), we wonder when the bears are going to cave in here. Aphria pincher price action between the recent lower-high/higher-low should breakout once new closing highs/lows are established on either side. Given the way the sector is acting right now, we believe odds favor upside extension. While most of APH’s peers would participate under such circumstances, Aphria could be setting up for some extra out-performance. The fun begins with an hourly closing high above $22.00/share. while an hourly close below $18.57 would likely trigger more extended downside extension.