The long-term outlook for Air Arabia has improved since the beginning of the year when the stock broke out (above Dh0.78) of a bullish double bottom trend reversal pattern in the last week of 2012. It continued higher from there before being stopped by resistance at Dh0.94 in mid-February, the most recent peak.
However, the near-term outlook has become more clouded recently as the stock has moved into corrective mode. It dropped sharply at the end of March falling to Dh0.75. That drop completed a 50 per cent retracement of the uptrend begun from the June 2012 low of Dh0.55. Before the drop Air Arabia had been struggling for several months, even as the price continued higher, with a significant decline in the momentum which had earlier seen the stock gain 65 per cent in a little over six months.
So far there has been only one sharp decline from the recent peak, which was followed by a bounce . It’s therefore likely that we’ll see another decline, or certainly a period of relatively sideways choppy price action before the correction is complete. It’s likely still in its early stage since there has been only one swing down. The next support zone below 0.75 is around 0.70, followed by 0.66.
At this point the stock would have to close above Dh0.95 to give a bullish signal. While a rally above near-term resistance of Dh0.85 is short-term bullish, there are a number of price levels which may show up as resistance up to 0.92.
