Trading Room – Fri 2 Nov 2018
Oil prices fell more than 2.0% on Thursday, with U.S. crude hitting its lowest level in nearly seven months as last month’s steep losses continued into November.
U.S. West Texas Intermediate crude ended Thursday’s session down US$1.62, or 2.5%, at a nearly seven-month low of $63.69. The contract bottomed out at $63.11 earlier in the session, its weakest price since April 9.
Brent crude, the international benchmark for oil prices, was down US$2.07, or 2.8%, at US$72.97.
Both benchmarks posted their worst monthly drop since July 2016 in October, with WTI down nearly 11.0% and Brent tumbling almost 9.0%.
The drop in crude oil prices are likely to boost the sentiment and earnings for airline operators such as low-cost carrier AirAsia X Berhad.
AirAsia X is a transportation stock and is categorised as a consumer products and services under the travel, leisure and hospitality sub-classification by Bursa Malaysia classification.
What could be an elite trader’s trading plan towards the stock?
As highlighted by the mPower Algorithm report, the stock has a beta of 1.09, which means it is only slightly more volatile than the market.
We also like the stock for trading given that it’s a consensus stock which is tracked by analysts and also institutional funds and has a high volume and liquidity. In fact, the stock has a five-day simple average of around 6.0m shares traded daily.
Based on data from Bloomberg, the stock is tracked by at least 11 analysts and are quite well liked with an average fair value fundamental target price of RM0.383.
The stock current price of RM0.23 is well below that of the fair value target price.
Should one buy into AirAsia X at its current price juncture?
You should enter and trade the stock as soon as it crosses this key criterion (act on intra-day basis) on the specified volume and other criteria highlighted in the report.
Where should you stop out and take profit upon entry? Follow the guidelines in the report carefully to manage your trade in an optimal manner.
The stock has good target levels in our view and is thus attractive given the projected reward to risk ratio.