Wednesday, July 03, 2013

Coastal- the lagging warrant price could be a warning

On June 21, Coastal dropped 62 sen to close at RM1.48 at the close. After the highly unusual trade, the share price quickly recovered back above the RM2.00 on June 25 (two business days later). But, that's not all. The recovery keeps on going until it closed at RM2.28 on July 1- matching the recent highest close on June 5. Yesterday, it broke above the horizontal resistance of RM2.30 and chalked up 22 sen to close at RM2.50. What's up with Coastal?

It must be noted that the other 5 stocks- BJToto, HSPlant, BKawan, CBIP & TDM- that tumbled down on June 21 had also staged impressive recovery. But, their price recovery was only back to the pre-fall prices. So, the sharp rise in Coastal is unique to the stock.

Chart 1: Coastal's daily chart as at July 2, 2013 (Source: quickcharts)

And, yet the enthusiasm for Coastal is not shared by Coastal-WA, which traded only marginally higher. The reason for that could be due to the warrant's high premium of 45% (as it has an exercise price of RM3.18 and expiring in July 2016) . Still, elevated premium has not deterred speculators in the past when they thought the stock has room to go. Why now? This non-confirmation or divergence could be a warning. If there is something good for the stock, the buyers would not confine their trading only to the shares but also to the underlying derivative.

As such, I would urge caution to those trading on Coastal. The immediate resistance for the share is at the next horizontal line at RM2.55. At this mark, I think if you have the stock, you should take some profit.

Chart 1: Coastal-WA's daily chart as at July 2, 2013 (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, Coastal & Coastal-WA.


Billy Teo said...

Hi Alex,

What's the resistance and support level for Yeelee?

It dropped 6 cents today and 10 cents from high of 1.38.

Is the upside momentum still there?


Anonymous said...

hi alex-today bis star news headline on ewein maybe getting a piece of the undersea tunel job in far fetch is this newsbit in your view?do u think it will come about?actually i went in on friday at 88 with no news whatever.just observeing the builtup in volume lately.any comment? TQ

steve said...

45% premium on the warrant is high. This is the major reason why the warrant is not moving up. Isn't it?

The same applies to properties/construction warrants. When mother share down, they hold a higher premium of 8% to 10%. However, when mother share up a lot, these warrants has a premium down to 3% to 5%.

As for Coastal, it's obviously a speculation play to catch up with other O&G players riding on positive news flow of its acquisition of jack-up drilling rig.