Coastal- making new high everyday!

Coastal broke above the horizontal line at RM2.60 in mid-July and made a high of RM3.12. Thereafter, it consolidated for 3 months and on October 22, it broke above the July high. With the latest breakout, Coastal is continuing on its uptrend. Based on projection, the current rally could hit a high of RM3.60 if we assumed that the distance of this rally is equivalent to the distance between the recent low (of RM1.60) and the breakout level (of RM2.60). That was what happened in March 2011.



Technically speaking, Coastal's current rally into all-time high territory is a very bullish sign. However, I am a bit puzzled as to why its warrant seems to be non-participative or lagging behind the price movement of the share. The warrant will either rally to catch with the share or the share will have to pullback. One possible explanation is that there is an offer to buy up the company where the offeror has fixed the prices for the share and the warrant. Since the warrant is now trading at a premium of 11%, the offered price for the warrant may be close to the current market price. As such, those in the know choose to buy the share instead of the warrant.

Notwithstanding the buyout scenario, I believe that the warrant is the better way to play the rally in Coastal. This is especially true if the warrant can surpass its horizontal line at RM0.62.

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Chart 1: Coastal's weekly chart as at Oct 30, 2013_12.00pm (Source: Quickcharts)

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Chart 2: Coastal-WA's weekly chart as at Oct 30, 2013_12.00pm (Source: Quickcharts)

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Coastal.

Author: Alex Lu