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Air Canada’s Boeing Dreamliner 787-8 flies into Canadian airspace Spring 2014. (AIR CANADA)
Air Canada’s Boeing Dreamliner 787-8 flies into Canadian airspace Spring 2014. (AIR CANADA)

Schizas' Mailbag

Air Canada shares struggle to regain altitude Add to ...

Hey Lou,

Please give me your insight on Air Canada.

Thanks,

Mario

Hey Mario,

Thanks for the assignment.

This will be the third time since March of 2013 that I study the situation at Air Canada. The last examination was on Oct, 11, 2013, on a request from Manny. The shares were trading for $4.98 after having more than doubled after the release of better than expected second-quarter data in August. Sellers didn’t appear to be taking control of the market and it was advised that it appeared that the stock was presenting a case of buy high and sell higher.

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I did caution that the shares were overbought and could be vulnerable to a pullback ahead of third-quarter results scheduled for November. There was a small retreat ahead of the release but from there it was full throttle to a 52-week high of $9.90.

Another investigation of the charts will help identify what we could expect from this carrier.

The three-year chart paints the picture of a stock that ran hard and then pulled back aggressively. The retreat has seen the shares breach support along the uptrend line and the 50-day moving average. As noted in the October analysis, when a stock moves up in a near straight line it often fails to build any significant support, which means when the selling starts investors can’t find levels at which they feel confident to hit the buy button.

The RSI and The MACD provided a sell signal in December followed by a buy signal in early January of 2014 and a sell signal at the top in mid January. What is noticeable is that AC.B has given up nearly $4.00 from the 52-week high and is attempting to build a base at $6.00.

The six-month chart provides a tight shot of the sell signals generated by the MACD and the RSI in late January and the gap down in February on weak fourth-quarter results. The next earnings report is scheduled for May of this year and given the highs and lows that have followed the announcements it would be in your interest to get on the calendar like a duck on a June bug.

At this junction I would advise being patient. The uptrend has been broken and the shares are trying to build support. In addition, the volume has thinned out over the last two months indicating that the hot money is currently looking elsewhere for action.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

 
Security Price Change
AC.B-T Air Canada 9.73 0.02
0.206 %
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