AirAsia 5099 >>> FLYING HIGH UP TO THE SKIES

Since our trading buy call on AirAsia on the 15th of July at a price of RM1.16, AirAsia Bhd has surged 27.5% in just 2 weeks. Our trading target of RM1.50 has now been achieved. Ironically, even we did not expect our target price to be achieved so fast.
However, considering the strength of AirAsia’s rally, it’s obvious that the bulls are not done yet. Our research team also has a buy call on AirAsia at a 12-month target price of RM1.90.
Where to next?
Considering the bullish strength of AirAsia’s rally, it is obvious that AirAsia is heading higher. From the chart above, AirAsia can be seen forming a much steeper red 5-month upward trading box that has broken above its longer term blue 1-year trading box. This signifies bullishness in the mid term. If AirAsia can break above its major 1.70 resistance, it will likely head towards the 2.00 region soon.
How to trade AirAsia and minimize risk
Though AirAsia will head higher in the next few days, it is in overbought territory with a 14-day RSI of 81%. We advice traders to wait for corrections by late next week to accumulate AirAsia at lower prices for a trade towards the 2.00 level.
Trading the Call Warrants
AirAsia has two call warrants which is AirAsia-CE (RM0.22) and AirAsia-CF(RM0.26).

It is risky trading AirAsia-CE as it is due to expire on the 3rd of September 2009. AirAsia-CF is a better trading option, currently at a premium of 13.5% with an expiry 1.5 years later on the 21st of January 2011. It should be noted that call warrants are bullish instruments and should only be treated as a short term trading tool, and not as a buy-and-hold. We expected the premiums of its call warrants to decrease as their mother shares rally higher.

We retain our bullishness of AirAsia and revise our target trading price upwards to RM2.00.