Airasia flying high again?

I have posted about the negative impact of the MAS-Airasia tie-up on Airasia (here). For the past few weeks, there were strong rumors that the deal would unravel due to strong opposition from the staff of MAS. Today, we have the official announcement that this deal is in fact dead (here).

Since the tie-up is deemed a negative for Airasia, the termination of the tie-up would have the opposite effect of propelling the price higher for Airasia. This is exactly what has happened to Airasia share price for the first hour of trading this morning.

If you look at the chart below, you will see that Airasia is in an intermediate downtrend line, with resistance at RM3.60. If it can break above that level, the stock could rise further. However, the market & the insiders would have positioned themselves for today's official announcement & they could be selling to the latecomers.

Based on technical consideration, I think we should avoid being overly aggressive in buying Airasia at the current price of RM2.60. This could be a good level to reduce position or take profit.


Chart: Airasia's daily chart as at May 3, 2012_10.15am (Source: Quickcharts)