For Aphria Inc (TSE:APH) (OTCMKTS:APHQF) (FRA:10E) investors, the last 2.5 months have been exceedingly challenging. After yielding some of the strongest returns among the Top 20 most capitalized Canadian cannabis companies since 2015, the inevitable drawdown phase has been arduous. With Aphria technicals broken on a near-term basis, we examine whether the approaching 200-Day moving average provides an ideal accumulation zone for investors seeking low-risk entry points.

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Speaking of the strong returns, Aphria has few peers among cannabis’ upper-echelon. Since its founding on December 1, 2014, shares have exploded from about $1.00/share (when shares were trading as a capital pool company known as Black Sparrow Capital Corp.) to a high of $24.75/share on January 9, 2018. In just over three years, shares appreciated 2375%, and anyone fortunate enough to have held throughout staked a certifiable 10-bagger. The cannabis sector was on fire, and life was good.

Then, on a dime, sentiment changed. Since early January—save for Aurora Cannabis which double-topped on investor enthusiasm related to the CanniMed Therapeutics deal in late January—the cannabis sector has been in free-fall. Driven by questions related to valuation, price sustainability, potential supply guts and generalized risk asset wariness, sentiment flipped.

Of course, this new negative paradigm wasn’t limited to Aphria. Everyone in the space—both small and ‘large’ caps alike—has suffered to varying extents. We recently wrote about how no cannabis company is currently trading above a 20-Day MA, and only one company—Canopy Growth Corp—is trading above the 50-Day MA (territory it’s dangerously close to ceding). The selling has been indiscriminate.

But with likely cannabis survivor Aphria now on a collision course with its 200-Day MA, our focus is on investor reaction at this key level. Will the 200-Day MA be a ‘line in the sand’ for investors?

As one of the first major cannabis stocks poised to test this moving average, the subsequent result should be of interest to all cannabis investors. If the ‘200’ isn’t defended resolutely, what does this say about the rest of the sector? We have no reason to believe Aphria’s weakness is company-specific.

Aphria’s Collision Course With The ‘200’

Adding further intrigue to Aphria’s impending collision course with the ‘200’ is the fact that Aphria is deeply oversold. As of this writing, shares are down another ↓3.15%, or $0.35 to $10.90/share. Should the chart print another red candlestick, that would mark ten consecutive negative sessions for the Leamington-based medical cannabis and refined goods producer.

Not only are double-digit session declines rare in the cannabis space, they’re unheard of.

Upon analyzing the Top 10 companies by market capitalization going back to 2016, no Canadian cannabis stock has declined by more than 8 consecutive sessions. This was recently accomplished by Emerald Health Therapeutics between February 7-16, and more recently by Aurora Cannabis between March 13-22. Aphria, down again today, now takes this dubious honor it rather not have.

Technical Take

Author’s Take

As I conclude this article, Aphria is just $0.17 from the 200-Day MA at $10.58/share. Given the immense oversold condition in the stock price, some measure of ‘bounce’ seems likely. Not only has Aphria declined 10 straight sessions, prices have collapsed 27.16% during that time. That’s an extraordinary amount for a company considered one of the best in class.

However, the key question isn’t whether a bounce is coming, rather, whether the ‘200’ will be defended and to what degree. This should give investors a clue as to the state of the broader cannabis sector, which is struggling to catch a bid. Being among the first cannabis companies to test this key level in recent months, investors will no doubt be watching the $10-10.58 primary support zone.