RMG: Royal Mail Share Price Could Crash to 245p Soon

Summary:
• The Royal Mail share price has been in a strong freefall as the company’s demand weakens and demand for its goods and services retreat.

The Royal Mail share price has been in a strong freefall as the company’s demand weakens and demand for its goods and services retreats. As a result, RMG slipped to a multi-month low of 258p, which was about 51% below the highest point in 2021. 

Royal Mail Group performed well during the Covid-19 pandemic as the volume of e-commerce sales jumped. As a result, the company’s revenue and profitability jumped sharply such that the firm declared a 400 million pound special dividend in 2021. 

However, the good times lasted for a short period. Now, with the pandemic less severe, people are more comfortable shopping in stores. As a result, the volume of e-commerce deliveries has slumped sharply in the past few months. For example, in statements last week, Asos and Boohoo warned that they were seeing weak volume growth.

Now, Royal Mail has more problems to think about. With the rail workers on strike, there are concerns that RMG could be next. The company’s workers are set to go to the ballot to vote for a strike. The union that represents 115k postal workers wants a pay hike that corresponds to inflatiom. If this happens, the company will need to hike salaries by almost 10%. Such a measure will affect its already thinning margins considering that fuel costs have also surged.

Royal Mail share price forecast

The weekly chart shows that the RMG share price formed a double-top pattern at about 500p. In price action analysis, this pattern is usually a bearish sign. However, it managed to move below the chin of this pattern at around 395p in February of this year. At the same time, it is about to form a death cross, which forms when the 200-day and 50-day moving averages make a crossover. 

Therefore, using the trend-following strategy, the outlook for the shares is bearish, with the next key support being at 225p. This is notable since it is along with the second support of Woodies pivot points. A move above the 200-day MA at 340p will invalidate the bearish view. The bearish view is in line with the previous RMG outlook.