The Rolls-Royce share price has been struggling in the past few weeks as investors worry about margins and business growth. The RR stock is trading at 92.27p, which is the lowest it has been since June 2021. It has crashed by about 40% from its highest level this year, meaning that it has underperformed the FTSE 100 index.
Rolls-Royce Holdings is currently facing a perfect storm. For one, as an industrial company, it is struggling with the rising cost of doing business. The prices of most raw materials it uses like steel and aluminum have jumped sharply following the Russian invasion of Ukraine. As Russia is one of the biggest sources of these commodities globally.
Second, western countries have sanctioned most sectors in Russia. As a result, it has become a bit difficult for Rolls-Royce to source titanium, which is an important metal used in aircraft engines. This is notable since Russia is one of the biggest sources of the meta. Further, the aviation industry is also struggling. Airlines are being forced to use longer routes while the cost of fuel has jumped sharply. This is an important factor since Rolls Royce makes most of its money in civil aviation.
A potential benefit from this crisis is that its defense business will do well as countries boost their protection spending. Some European countries have already committed to boosting their spending to about 2% of GDP in the near term. The main catalyst that will affect the Rolls-Royce share price will be the JP Morgan Industrials Conference that will happen today (March 16th). In it, the management will talk about the state of the industry and potential risks and opportunities.
The daily chart shows that the RR stock price to a high of 150p in November last year. Since then, it has crashed and is currently trading at 92.27p. Along the way, the shares have dropped below the 25-day and 50-day moving averages. It has also found strong support at about 87p while the MACD has moved below the neutral level.
It has already formed a bearish pennant pattern. Therefore, there is a likelihood that the Rolls-Royce share price will likely keep falling as bears target the next key support at around 75p. This view will be confirmed if the stock moves below the YTD low of 84.25p.
This post was last modified on Mar 16, 2022, 09:15 GMT 09:15