Rolls Royce share price declined for the third session in a row on Monday, going down by 0.3 percent on the daily chart to trade at GBX 537.3 at the time of writing. The performance mirrored its struggles in recent times, which has seen it go down by 5.5 percent in the last five sessions and by 4.6 percent in the last month.
With the bears in control, Rolls Royce (LSE: RR.) trades below the 20-day Exponential Moving Average (EMA) level and marginally above the 50-EMA. These underline the stock’s weak traction. However, its still among the best performers in the FTSE 100 index, with year-to-date gains of 79.6 percent as of this writing. In addition, the company’s strong order book and successive quarterly earnings forecast beat are a strong foundation for a potential reversal in the coming weeks.
The Rolls Royce Price-to-Earnings (P/E) ratio is at 19, which compares favourably with rival giant General Electric’s 31. A high P/E ratio is generally interpreted as meaning that a company is potentially overvalued. Therefore, as the Rolls Royce share price has declined in recent days, it also presents a good opportunity to own a part of a company with good earnings at a lower price.
Looking ahead, Rolls Royce is increasingly focusing on transitioning to full electric by the end of this decade. That could potentially have cost implications but also increase earnings.
On the chart below, the momentum on Rolls Royce share price calls for further downside, and the pivot is likely to be at 536.8. With the sellers in control, the price could find the first support at 536.0. However, a stronger downward momentum could break below that level and test 531.8.
On the other hand, moving above 539.8 will favour a takeover by the buyers. In that case, the first barrier is likely to come at 542.8. However, if they extend that control, the price could break above that level and test 545.4.
This post was last modified on Nov 18, 2024, 13:02 GMT 13:02