Thursday, September 13, 2012

Airasia hit an air pocket!

Airasia plummeted in the past 3-4 days from RM3.40 to an intraday low of RM2.82. The sharp drop was prompted by concern that the new LCC, Malindo could be a threat to its operation. In my opinion, any LCC will take away some business from Airasia. However, we have seen many rivals folded up or struggling to breakeven in this cut-throat business. As such, the selldown in Airasia is excessive, bordering on irrational or emotional.

Technically speaking, Airasia has broken its uptrend line, SS which stretched back to March 2011. That breakdown happened in late August at the RM3.50 level. The past 4-day selldown is excessive in two areas:
1. The volume is equal to that registered in the selldown in August 2011 (denoted as 'A'). Such huge volume would create a vacuum, which allows an opposite move to take place.
2. The drop was also excessive in that the indicators, such as MACD, RSI & ADX, all went plunged sharply. Again, we can see that the last time these indicators moved to such extreme (in September 2011), the stock then enjoyed a rebound (denoted as 'B').

Based on these two reasons, I believe that Airasia could be set for a rebound. The rebound could bring the stock back up to RM3.20-3.30.

Chart: Airasia's daily cahrt as at September 13, 2012_3.00pm (Source: Quickcharts)

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Airasia.


Fabien Wong said...

Hi Alex, how about PPB? PPB experiencing similar sharp fall.

tailow said...

alex best call of d year....

tailow said...

alex best call of d year....

Alex Lu said...

Hi Fabien Wong

PPB has broken its long-term uptrend at RM15.50 in July. It has tested its horizontal line at RM12 & it is now rebounding.

It is trying to recover back above its violated uptrend line. This endeavor may ultimately be unsuccessful but it may come up to RM14. As such, it could be a trading BUY. However, this is a trade involving considerable risk & it will test your trading skill. If you are a beginner, I would advise against it.