The Rolls-Royce share price has been in a tight range recently as investors weigh the ongoing recovery of the aviation industry. RR shares ended the day at 105.72, where it has been in the past few days.
As one of the biggest players in the civil aviation industry, Rolls-Royce has been affected greatly by the pandemic that has seen many of its planes it serves idle. Sales of new aircraft engines has also declined as more airlines have struggled because of the pandemic.
However, there is light at the end of the tunnel. The company has already boosted its balance sheet and the aviation industry is recovering as more countries open their air space. It is also expected to raise capital through asset sales such as Norways’ Bergen.
The company is also in talks with Boeing about a new aircraft program. Recent results by airlines like Ryanair and easyJet have also signaled that the aviation industry is seeing an impressive recovery as the vaccination process intensifies.
The RR share price, however, after bouncing back early this year, has stalled. The shares are trading at 105.72p, where it has been since March. It is also 23% below the highest level this year and has even underperformed many FTSE 100 constituents. So, what next for RR?
A look at the weekly chart shows that the RR share price dropped sharply in 2020 amid the global pandemic. Precisely, the shares declined from a high of more than 200p to below 50p. The chart shows that the stock’s decline started even before the pandemic because of the problems in its Trent 1,000 engine.
The shares have found a lot of resistance at the 78.6% Fibonacci retracement level that is also at the 50-day and 25-day exponential moving averages. It has also formed what looks like a bullish pennant pattern that is shown in orange. In technical analysis, this pattern is usually a sign of bullish continuation.
Therefore, while it is relatively easy to tell, there is a possibility that the shares will bounce back as investors target the 61.8% Fibonacci retracement level at 190p, which is almost 83% above the current level.
Nonetheless, a drop below the support at 87.7 will likely invalidate this prediction since it will signal that there are still sellers left in the market.
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