Rolls-Royce Share Price Analysis as it Crawls Back

Summary:
• Rolls-Royce share price has made a slow recovery in the past few days as investors focus on the Truss administration. What next for RR stock?

Rolls-Royce share price has made a slow recovery in the past few days as investors focus on the new Truss administration. The RR stock rose to a high of 78.44p, which was higher than this month’s low of 69.75p. This price is still substantially lower than its highest point this year. It has underperformed the FTSE 100, FTSE 250, and BAE Systems.

More defence spending

Rolls Royce’s share price has lagged other top FTSE 100 stocks in 2022 as investors worry about the company’s recovery and soaring cost of doing business. Broadly, the company’s key segments are doing well, with the civil aviation sector making a strong comeback. Regional and international flights have recovered, with companies like Delta, Etihad, and British Airways publishing strong results.

However, a closer look at the numbers shows that intercontinental flights have seen a slower recovery than regional ones. This is one of the reasons why the Rolls-Royce share price has struggled lately. For one, the company makes most of its money servicing wide-body jets.

Rolls-Royce share price has also collapsed because of the falling sterling. The British pound has crashed by more than 17% this year alone. The impact of this collapse has been mixed. On the one hand, the weak pound has made its products much cheaper internationally. However, it has also made it expensive to export key raw materials.

Another positive for Rolls-Royce is that it has vast businesses abroad that deal with US dollars. For example, in 2018, the company generated over 5 billion pounds in the US. It specializes in military equipment. 

In addition, with the aviation industry set to recover, another catalyst for the Rolls-Royce share price is the soaring defence spending internationally. Key countries like the US and Europe will continue boosting their defence spending due to risks posed by Russia and China.

Rolls-Royce share price forecast

The daily chart shows that the RR share price has been in a bearish trend for months. Along the way, the stock has formed a bearish triangle pattern that is shown in purple. This pattern is usually a bearish sign. It managed to move below the support at 77.72p this month. Now, it has retested the lower side of the descending triangle pattern.

Therefore, there is a likelihood that the stock will continue falling as sellers target the next key support level at 50p. A move above the resistance level at 81p will invalidate the bearish view.