The Rolls-Royce share price will be in the spotlight this week as investors focus on the Omicron variant and the company’s trading statement scheduled on Thursday. The RR stock is trading at 124.90, which is about 17% below its year-to-date high.
Rolls-Royce Holdings has had a mixed year so far. The company has already turned profitable and its revenue growth has been relatively strong. It has also announced major deals to build small nuclear power plants in the UK. Most important, the company is partnering with the Qatari government on renewable energy. It also received a major order from the United States government.
The company’s order book is rising and the reopening of the transatlantic travel means that its flight hours will rise. Also, the company has made significant progress in repairing its Trent 1000 engines.
However, the new Omicron variant is a threat to the company. As I wrote last week, airlines like United have started warning about their transatlantic demand. Also, it means that countries like Australia and New Zealand will take longer to reopen.
This week, Rolls-Royce Holdings will provide more colour about its business. Analysts will focus on the company’s order book and its cash flow status.
The daily chart shows that the RR share price made a major bearish gap after the Omicron outbreak was announced. The warning was on the wall before this crash. Besides, the stock had formed a double-top pattern, which is usually a bearish sign. The neckline of this pattern was at 131p
The stock has managed to move below the 50-day and 100-day moving averages and is hovering around the 23.6% Fibonacci retracement.
Therefore, while the stock will likely make some recovery, there is a likelihood that it will keep falling as bears target the 38.2% retracement at 106p. This view will be invalidated if the stock rises above 135p. This view is in line with my December forecast for the stock.
This post was last modified on Dec 06, 2021, 05:05 GMT 05:05