IAG share price has plunged below 144p, which was the key support level. The shares of the British Airways owner, along with rival airlines, are not having the best few weeks in the wake of the Hamas-Israel war. Due to increased selling pressure, the shares are changing hands at 141p and have lost about 5p from yesterday’s close.
The FTSE 100 index slipped on Wednesday. The British benchmark index failed to break above 7680 points resistance level which sent a bearish wave across the whole market. This also resulted in a strong sell-off in the airline sector which was already facing strong headwinds due to rising fuel prices.
In the past two weeks, IAG shares have corrected 8.6% and may slide further as the conflict in the Middle East rages on.
The Civil Aviation Authority set a ceiling for the ticket price that an airline could charge for its services. This decision was appealed by IAG, Delta, and Virgin Air. The UK Competition and Market Authority asked CAA to review some of its pricing suggestions, but overall, the Aviation Authority “was not wrong” on most of the issues.
The downtrend in airline stocks in general and the IAG share price in particular can be attributed to the strong rebound in oil prices amid rising tensions in the middle east.
Recently, the EU set up a rule that at least 2% of the total fuel of airliners should comprise sustainable aviation fuel. However, major European airlines argue that more money would be required to achieve this target by 2025. IAG was also pessimistic about this mandate as it expects a 90% chance of failure that SAF will be adopted in the given time frame.
The chart below shows the LON: IAG suffering a 7% correction after retesting the 200 MA which acted as a dynamic resistance. Furthermore, the shares of the British Airways owner retested their yearly highs back in August and have been in a tailspin ever since. As a result, the shares now sit 18% below their August highs.
It is critical for the bulls to hold the 144p support which I have repeatedly mentioned in my previous forecast. In case of a breakdown below this support level, the price is expected to freefall towards 128p which will also be a retest of March lows.
This post was last modified on Oct 18, 2023, 15:36 BST 15:36