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Here’s Why the Royal Mail Share Price Could Soon Spike

The Royal Mail share price is in a tight range as investors reflect on its spectacular rally and prepare for what to come as the UK economy reopens. The new FTSE 100 constituent company is trading at 568p, where it has been in the past few weeks. It is still more than 300% above its lowest level in 2020.

Royal Mail news. Royal Mail is a leading postal company in the UK. The company has gone through an evolution in the past few years as the volume of letters sent has dropped substantially. Instead, the company has become a leading player in the parcel business. And unlike the United States Postal Corporation, Royal Mail is a highly profitable company that made more than 700 million pounds of profits last year. 

Still, the Royal Mail share price has struggled lately as investors reflect on whether the company will continue seeing substantial demand as the UK reopens. Their thinking is that its demand will slowdown as people shop physically instead of online. Bulls believe that the RMG shares will keep rising since the country has already established itself as a leading player in e-commerce. Bears, on the other hand, expect that the company will go back to its old days of underperformance as competition intensifies.

At the same time, a Discounted Cash Flow (DCF) calculation shows that the stock is incredibly cheap. According to Simply Wall Street, the company is trading at a discount. This, together with a price action pattern mean that the shares could soon bounce back.

Royal Mail share price analysis

Like I have written before, the RMG share price has formed a bullish flag on the daily chart. Now, turning to the weekly chart we see the reason why the stock is in a consolidation mode. The reason is that the stock is trading at the important resistance, where it struggled to move above on May 18. 

As such, this could be said to be a cup and handle pattern. Therefore, I suspect that the shares will ultimately break out higher as bulls attempt to move above that resistance. On the flip side, a drop below 500p will invalidate that prediction.

RMG shares chart

Royal Mail share price

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