Airasia- Can it weather the high fuel price better than SIA?

Yesterday, SIA dropped 2.2% to S$12.83 due to a 82%-drop in its net profit to S$45 million for 1Q2012 (QE30/6/2011). I have commented briefly on SIA's deteriorating financial performance in my earlier post on Airasia (here). To recap, Airasia's net profit dropped by 46% q-o-q or 23% y-o-y to RM172 million while turnover dropped 11.7% q-o-q but rose 20.4% y-o-y to RM1.048 billion for QE31/3/2011. Would Airasia suffer a similar fate when it announces the results for QE30/6/2011? For more on the drop in SIA share price, go here. For more on the SIA's results, go here.

From the weekly chart (Chart 1), we can see how Airasia broke to the upside of the loud-hailer formation (or, the inverted triangle) and continued to rally. However, Airasia's share price performance cannot be gravity-defying forever. At some point, it could be impact by poorer financial performance which would probably come from higher fuel cost or slowing demand. The slowdown in air travel would coincide with a slowdown in the global economy.


Chart 1: Airaisa's weekly chart as at Aug 2, 2011_plotted on log scale (Source: Tradesignum)

Looking at Chart 2 below, we can see the interaction between the share price & the 10-day, 20-day & 40-day SMA lines. Short-term traders could benefit by buying on dips to the 20-day SMA while selling when the share price pulls away too far from the 10-day SMA line. For medium-term players, you should watch out for bearish divergence in order to trim your position ahead of 1-3 month consolidation. Good luck!


Chart 2: Airaisa's daily chart as at Aug 2, 2011 (Source: Tradesignum)