The oversold situation was the set-up for a strong rally which brought the share price up to RM1.60 in mid-October. Then the rumor of a possible management buyout surfaced. I found that to be very strange because you would expect the management to undertake a buyout when the share price is in the dump. Equally strange is the fact that after the rumor came out, the rally in the share price ceased. Was the rumor intended to draw in new buyers or to serve as a brake to facilitate a gradual sellout by existing shareholders?
Yesterday we have the release of the crash report for Airasia Flight 8501. The crash was attributed to pilot error as well as a technical fault. In my opinion, the later is very damaging. To wit:
(T)he system that regulates the plane's rudder movement kept malfunctioning because of a cracked solder joint. Aircraft maintenance records found it had malfunctioned 23 times in the year before the crash, and the interval between those incidents became shorter in the three months prior to the crash, Indonesia's National Transport Safety Committee said in a report.One of the nagging concerns for low-cost carriers ('LCCs') is the safety standard- beginning with the reliability of its aircraft. An airplane with a persistent technical fault has been serving this airline for the past few months (possibly years) is a damning indictment of any airline- whether full-service or low-cost carrier. Airasia will be hard-pressed to explain why it kept the airplane in service; thus, sacrificing passenger safety. This dark cloud will weigh on Airasia for a while and it would drag down its sale & its profits.
Chartwise, we can see that Airasia is still in a downtrend line, SS with resistance at RM1.45. Its immediate support is at RM1.40 and then RM1.30.
Chart: Airasia's monthly chart as at Dec 2, 2015 (Source: ShareInvestor)
Based on negative newsflow & bearish technical outlook, Airasia is rated a SELL.
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.