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AIRASIA Group Bhd's rally picked up steam on Monday as it made another strong advance past the 200-day simple moving average (SMA) in intra-day trade to indicate a return to positive sentiment.
Monday marked the fifth straight day of the stock's rally, adding momentum to the ongoing rebound.
The counter had reached a recent high of RM3.39 on Feb 21 before it entered a steep correction phase. The share price pulled back to a recent low of RM2.42 before it began its positive retracement.
The stock's positive crossing of the 200-day SMA also represented a breach of the 38.2% Fibonacci retracement level, marking the breach of an important technical retracement level. The share price returned below the moving average by market close, indicating profit-taking, but there is evidence that investor sentiment is growing.
Looking at the daily price chart, the 100-day SMA hovers overhead, applying selling pressure on the stock.
Should the rally continue, the share price is expected to surpass this hurdle and target the RM2.87 mark.
However, given the highly overbought levels of the stock, a retreat at the RM2.87 mark is expected.
Indeed, investors should practise caution as the rally nears its next resistance, given that the 50-day SMA crossed below the 200-day SMA last Wednesday, giving a bearish signal.
In the inevitable event of profit-taking, the stock is expected to retreat to the immediate support of RM2.68. Further support is seen near the 21-day SMA at RM2.57.
The overbought conditions in the momentum indicators are not showing any signs of abating. Hence while the indicators will eventually attempt to neutralise, the evidence suggests a continued push to the higher end for now.
The slow-stochastic momentum index is in extended overbought mode at 88 points and still ascending.
The 14-day relative strength index is also pushing higher in extended overbought conditions at 73 points.
Meanwhile, the daily moving average convergence/divergence line illustrates a sharp pick-up in the uptrend as it rises bullishly off the signal line.
The comments above do not represent a recommendation to buy or sell.
http://www.thestar.com.my/business/business-news/2019/04/30/airasia/
