Rolls-Royce share price is up by 0.52%, continuing the strong gains started in October. The shares have jumped by more than 235% from its year-to-date split-adjusted low of 34p. So, is Rolls Royce a buy, hold, or sell in 2021?
Why did Rolls-Royce stock rise: RR share price jumped from October as investors reacted to multiple catalysts. First, investors welcomed the company’s dilutive fundraising that improved its overall balance sheet.
Second, they cheered the new coronavirus vaccines that improved the possibility of a return-to-growth for global travel. Third, the possibility – and the eventual – Brexit agreement improved the macro picture for the company. Finally, the management said that business condition was improving, which boosted investor confidence.
So, is Rolls-Royce out of the woods: Rolls-Royce faces some significant risks. For one, its income in 2021 will still be low considering that many airlines are still in trouble. Still, investors are banking on a slow and eventual recovery. Also, the company is facing significant risks if global central banks start the tightening process. Most importantly, there are still risks about the unresolved Brexit issues.
Turning to the weekly chart, we see that the Rolls-Royce share price has found intense resistance at the 23.6% Fibonacci retracement level. It has also moved above the 25-day exponential moving average and is also finding trouble moving above the 50-day EMA.
Therefore, in 2021, there is a possibility that the stock will continue rising as bulls aim for the 38.2% Fibonacci retracement at 188p followed by the 50% retracement at 235p. However, a sharp decline below 100p will invalidate the bullish thesis.
