Aviva Share Price Analysis as It Announces Share Buyback

Summary:

The past 48 hours have been very hectic for Aviva's share price, after closing the markets trading at 414p on Tuesday

The past 48 hours have been very hectic for Aviva’s share price. After closing the markets trading at 414p on Tuesday, Aviva’s share price opened yesterday’s trading session with a gap-up of almost three per cent, trading at 426.7p. During the session, the price went up by 12 per cent to close the markets at 464.9p.

In today’s session, Aviva’s share price opened the markets aggressively bullish, and at one point, it was up by almost 2 per cent. However, as the session progressed, the prices started to come down, and the price is down by a percentage point.

Part of the reason we have seen a lot of volatility in Aviva’s share price is due to the company’s announcement that it was in a better financial position to do a share buyback. According to the company, the buyback would use money coming from the better-than-expected cash generation. The decision comes months after the company returned £4.75bn to investors.

In its first half report on Wednesday, the company indicated that the performance was partly due to the rising interest rates, which had enabled it to increase its Solvency II ratio from an expected 206 to 213. According to Citigroup, the company is expected to buy between £250mn to £300mn of shares.

The announcement about the share back saw the price of Aviva rising by almost 12 per cent by lunchtime in yesterday’s trading session. The strong bullish trend also extended to the early hours of today’s trading session before prices reversed and started to go down.

Following a price gain of 12 per cent in yesterday’s trading session, today’s drop of a percentage point is not surprising. The Aviva share price is currently undergoing a correction following the surge in price. Therefore, I expect the prices to resume the bullish trend after today’s push to the downside.

In the next few trading sessions, I expect the prices to start trading above the 480p price level. My analysis will, however, be invalidated should the current bearish trend result in prices falling below the 443p demand level. At that point, it will be clear that the trend has reversed to the downside.