- Summary:
- The Rolls-Royce share price has been under pressure in the past few days. Here’s why the stock could drop to 85p in the near term.
The Rolls-Royce share price has been under pressure in the past few days. Here’s why the stock could drop to 85p in the near term.
The Rolls-Royce share price has been under intense pressure lately on the dimming outlook of the global aviation industry. The RR shares are trading at 92p, which is 33% below December high of 136p. This makes it the worst-performing FTSE 100 constituent company in the past month, according to data compiled by Hargreaves Lansdown.
The outlook for Rolls-Royce deteriorated last week, when the company said it would shut down its jet engines factory for the first time ever. The company attributed this decision to lack of work and the desire to save money. Furthermore, with airlines not flying, demand for engines has fallen. And worse, its recovery could take longer than expected.
Rolls-Royce Holdings has also suffered significantly because of the few flying hours, especially among long-haul flights. This has impacted the most profitable part of the company’s earnings.
Rolls-Royce share price outlook
A few weeks ago, I warned that Rolls-Royce shares would retest 90p. That happened. And last week, I predicted that a rebound would likely provided that the shares moved above 100p.
Unfortunately, the situation has worsened, and the stock is still in a downward trend and is being guided by the 25-day moving average. It has also moved below the Ichimoku cloud. Also, it has formed a bearish consolidation pattern.
Therefore, in the near term, there is a likelihood that the shares will drop to 85p. However, a climb above 95p will invalidate this trend.
