•  Business profile - AirAsia X Berhad is a long-haul, low-cost airline based in Malaysia. It is an affiliate carrier of the AirAsia Group. AirAsia X offers flights on the Airbus A330-300 aircraft on routes beyond 4 hours flight duration across Asia Pacific and the Middle East.  Trading rationale – Since AAX was shortlisted in our stocks -to-watch list on 5 Apr, strong buying interest in the stock emerged catalyzed by weaker USD as well as recent decline in oil prices following comments from a Saudi prince that the kingdom will not freeze output without Iran and other major producers doing so, leading to cost reduction thus boos ting the company’s earnings.
• From technical view point, since its listing on 11 July 2013, share price developed a long-term downtrend for circa 2 years, as shown on weekly chart. However, a decisive Reversal Ascending Triangle breakout in the beginning of 2016 has turned around the stock into green zone. Currently, share price is trading above 10-, 30-, 50-, 100- and 200-d SMAs, signaling a continuous uptrend going forward. Recent share price retracement presents buying opportunities. We expect share price to establish an uptrend to complete its final Impulse Wave in the short term, based on Elliott Wave principle. A break above RM0.30 has triggered buy signal yesterday.
• Coupled with daily bottoming-up MACD, RSI and Stochastics oscillators, we are recommending a TRADING BUY on AAX, with technical upside resistances of RM0.325, RM0.35 and RM0.375 (long-term objective). Supports are at RM0.30 and RM0.29. Cut loss below RM0.28.
• Attractive risk to reward ratio with 23% upside against 8.2% downside. We see a good risk to reward ratio for investor with a theoretical entry price of RM0.305 given that the downside to the cut loss zone of RM0.28 is 2.5 sen (-8.2%) while the upside to the LT target of RM0.375 is 7 sen (+23%).

Source: Hong Leong Investment Bank Research - 6 Apr 2016