Rolls-Royce share price skids below 100p: So is RR now cheap?

Summary:

The Rolls-Royce share price has dropped 25% over the last month, and it may go lower still. But if it does, RR offers an attractive opportunity.

The Rolls-Royce share price has dropped 25% over the last month, and it may go lower still. But if it does, RR offers an attractive opportunity.

Rolls-Royce Holdings (LSE: RR) gained +3.47% to 90.02p yesterday as bargain hunters took advantage of the recent dip to add RR at the lowest price in 2021.

RR appeared to have turned the corner in June and was on the road to 120p. However, the latest covid surge and doubts over European reopenings have forced the share price back below the psychological 1000p threshold.

Furthermore, Monday marked a low point for RR investors in 2021, when the price traded down to 86.69p, exceeding the January 86.70 bottom by just 0.01p.

Understandably there are concerns about the worrying surge in infection rates sweeping the globe. This has hit UK aviation and travel shares particularly hard. EasyJet plc and IAG have seen similar-sized declines over the last few weeks. However, unlike Easyjet and IAG, which are up around 80% from their 2020 lows, the Rolls-Royce share price has increased 160% from the September 2020, 34.59p trough.

With the share price now seemingly breaking down, is it reasonable to expect it may soon suffer a similar fate?

RR share price prediction

The daily chart shows two clear trend lines in place from last year.

Firstly, a robust descending trend from June 2020 is present at 119p and provides a significant resistance level above the market.

Secondly, and more importantly, the Rolls-Royce price has slid to the horizontal trend line support at 86p. This poses an immediate threat. In January, when RR traded down to 86.70p, it bounced 50% to 128.71p before being rejected at the descending trendline two months later. Therefore, 86p should be viewed as important support. And should it fail, it may lead to an extension lower.

In this event, the Rolls-Royce share price would target the November low at 64.86p. Coincidentally, this price is 80% higher than the October low. Furthermore, it would also represent an 85% decline from the December 2013 record price of 444.06p.

For now, RR is respecting the 86.00p support. And should that continue, the price could recover the elusive 100p threshold. However, if Rolls falls below 86.00p, investors may get the chance to add RR at an attractive 85% discount from the all-time high.