Rolls-Royce Share Price Could Drop to 85p as Delta Spreads

Summary:

In this Rolls-Royce share price analysis, we explain why the stock could drop to 85p as the Delta variant of coronavirus rises

The Rolls-Royce share price has been in a tight range recently as investors continue focusing on the impact of the Delta variant on the aviation industry. The stock ended the week at 101p, which was slightly above the weekly low at 94.42p. It is at the same level as where it started the year at and 22% below the highest point this year.

Rolls-Royce news. Rolls-Royce Holdings is a leading manufacturer of jet engines that are mostly used by long-haul flights. Therefore, the stock has had a worse performance than General Electric whose engines are mostly used by local and regional planes. The stock has also been affected significantly by the spread of the Delta coronavirus variant that has forced governments to place new restrictions.

For example, on Friday, governments in France and Germany warned their citizens against travelling to Spain. There are also travel restrictions to countries like Portugal and Netherlands. Meanwhile, Australia’s New South Wales region has introduced new restrictions while Japan has reintroduced the state of emergency in Tokyo. Therefore, there is a likelihood that Rolls-Royce growth will struggle in the near term.

On a positive side, Rolls-Royce Holdings is close to resolving its Trend 1000 engine issues. According to Bloomberg, the company’s chief engineering director said that it was about the engines and the fixes done. In total, the fixes have cost the company more than $2.8 billion and seen it lose market share to GE. He said:

“After a difficult three or four years, I feel confident about the durability of the engines and the future. We have learned a lot.”

Rolls-Royce share price forecast

The daily chart shows that the Rolls Royce share price has been in a tight range recently. It has remained between the support and resistance levels at 96.52p and 113.52. At the same time, the shares’ Average True Range (ATR) has declined to the lowest level in months, signalling that volatility has dropped. The stock is slightly below the 50-day EMA.

Therefore, the RR stock will likely remain under pressure as investors targets the next key support at 85p. This prediction will be confirmed if the stock moves below the support at 96.52p. On the other hand, a rise above 105p will open the possibility of the shares rising to the resistance at 113.52p.