The Rolls-Royce share price is hovering near its lowest level since September this year as fears of the Omicron variant rose. The RR stock is trading at 112p, which is about 30% below the highest level this year. Other aviation stocks in the FTSE like IAG, EasyJet, and WizzAir have also retreated.
Rolls-Royce Holdings is a leading company in the aviation, energy, and defence industries. The firm makes most of its money in the civil aviation industry. In it, it sells some of the best-known engines and then services them. Therefore, although it is a diversified group, many investors view it using the lenses of the aviation industry.
The Rolls Royce share price surged to the highest level this year as investors priced in a quicker recovery of the aviation sector. However, these hopes have faded in the past few weeks because of the Omicron variant and the ongoing travel restrictions.
For example, during the weekend, the German government announced that it will put restrictions of travellers from the UK. They will all need to be tested for the virus and then stay for 14 days in quarantine. This will obviously discourage more people from travelling to Germany.
The Netherlands has also announced a nationwide lockdown while the UK economy has recorded a record number of infections in the past few days. This trend could affect Rolls-Royce’ supply chain.
In my RR share price forecast for the month, I warned that it would likely tumble to about 100p. This view has been relatively accurate since the stock is trading at 112p. It has moved below the 25-day and 50-day moving averages. The MACD is also below the neutral level while the price is slightly below the key support level at 116p.
Therefore, the Rolls-Royce share price will likely keep falling as bears target the key support at 100p. The stock will remain under pressure as concerns over the virus remain. This view will be invalidated if the price moves above 120p.
This post was last modified on Dec 20, 2021, 04:23 GMT 04:23