Airlines stocks- time for some profit-taking

In line with the expectation that crude oil prices may put in a rebound after testing the long-term uptrend line support of USD110, we shall now examine the possibility of a short-term correction in airlines stocks.

The US Airlines Sector index, XAL has nearly doubled, from a low of 12.6 on July 15th to close at 25.2 last Friday. From Chart 1 & 2 below, we can see that a strong horizontal resistance at 28 is coming up. This level is also the immediate 200-day or 40-week SMA for the index.


Chart 1: XAL's daily chart for August 8th (source: Stockcharts.com)



Chart 2: XAL's weekly chart for August 8th (source: Stockcharts.com)

On our bourse, the two airlines stocks, i.e. Airasia & MAS had rebounded quite well. Airasia gained 48% from its low of RM0.765 to close at RM1.13 last Friday, while MAS gained 32% from its low of RM2.94 to close at RM3.88 last Friday. From the charts below, we can see Airasia will encounter strong resistance at RM1.25 (& thereafter at RM1.40) while MAS's resistance will be at RM4.00 (which was tested on last Friday) and thereafter at RM4.40.

You may consider staggering out your profit-taking between the two resistance levels & retaining some position, in case the prices continue to go higher.


Chart 3: Airasia's weekly chart as at August 8th (source: Quickcharts)



Chart 4: MAS' weekly chart as at August 8th (source: Quickcharts)