Rolls-Royce Share Price: RR Could Drop to 96p

Summary:

In this Rolls-Royce share price forecast, we explain why the stock could drop to 96p in the near term. It has formed a bearish flag pattern

The Rolls-Royce share price dropped by more than 1% as investors reacted to the rising coronavirus cases and its impact on the aviation industry. The firm is also winding down the process of selecting a buyer of its ITP business.

What happened: The Rolls-Royce stock price has attempted to recover in the past few days after crashing to a multi-week low of 99p in March this year. However, today, the stock declined as investors worried about the rising number of coronavirus cases in some countries.

In the United States, the number of cases has surged in many states. The same trend is happening in India, the second most populated country in the world. In Australia, the government has abandoned the target of its vaccination drive because of the fears of the side-effects of the vaccine by AstraZeneca.

These issues matter because Rolls-Royce Holdings makes most of its money from the civil aviation industry. Its other segments like marine and energy are relatively small. Today, shares of most airlines, including IAG, EasyJet, and Lufthansa have all dropped. Still, as the vaccination drive continues, chances are that this will be a better year for RR than a year ago.

Meanwhile, KKR and Bain have become the potential companies that will by ITP. Carlyle and CVC Capital have been excluded in a process that is set to fetch Rolls-Royce more than $1.8 billion.

Rolls-Royce share price forecast

On the four-hour chart, we see that the RR share price has been attempting to recover lately. Indeed, it has risen by more than 12% from its lowest level in March. The stock has also formed a bearish flag pattern that is shown in black. It is also at the same level as the 25-day and 15-day moving averages.

Therefore, in my view, the stock will still break out lower as bears target the next 38.2% Fibonacci retracement level at 96.28p. However, a move above 115p will invalidate this trend.