Aphria's Must-Hold Support Level After Stock Plunges on Earnings

Aphria shares are plunging on weaker-than-expected earnings. Here's where must-hold support must come into play now.
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Have cannabis stocks lost their luster? Aphria  (APHA) - Get Report was clearly out of favor on Monday, down more than 14%.

The decline came after the company issued its fiscal-third quarter report. The company reported a wider-than-expected loss and missed on revenue expectations.

That’s usually a recipe for a decline, and without a bounce in sight so far it’s no surprise buyers aren’t stepping up to buy the stock.

Volatility was rampant in Aphria earlier this year. Same with Tilray  (TLRY) - Get Report, and it presented great trading opportunities.

However, if those opportunities have passed it may be best to leave this group alone for the time being.

Last week, earnings estimates were cut for Aphria ahead of the results so it’s not as though Monday’s reaction comes at a complete surprise.

That’s even as cannabis stocks have been in focus due to a larger push toward legalization. In any regard, let’s look at the charts.

Trading Aphria

Daily chart of Aphria stock.

Daily chart of Aphria stock.

Traders sold that massive spike higher in February before buying the dip a few days later. Since then though, volatility has come down quite a bit as Aphria stock has settled into a more narrow trading range.

While a test of the 10-week and 50-day moving averages initially resulted in a sharp rebound, both measures have now failed as support.

Although the 50-day failed last week, the 10-day moving average was holding up pretty well. That is, it was until Monday.

Plunging below those measures now, Aphria stock is declining right into the 21-week and 100-day moving averages. It’s also pulling back to the prior breakout spot at $13.75.

Bulls need to see this area hold if they are going to take a long position in the name.

If this area acts as support, look for Aphria to rebound back above $15, giving traders a chance to raise their stop-losses and try to push shares back up the 10-week and 10-day moving averages.

If this area doesn’t act as support, it’s possible Aphria stock revisits the $8.68 to $10 area, where it finds a prior breakout level and the 200-day moving average.

It’s very hard to be buyers of a stock that has clearly lost its stride. Sort of like Alibaba  (BABA) - Get Report before Monday’s rally. But let’s see if Aphria can hold support. If it can, bulls may find a new wave of momentum, even if it’s short-lived.