August 30, 2019. Zhukovsky, Russia. Aircraft engine Rolls-Royce Trent XWB long-range wide-body twin-engine passenger aircraft Airbus A350-900 XWB Airbus Industrie at the International Aviation and Space Salon MAKS 2019.

Rolls Royce Share Price in A Lull: Which Way Forward?

The Rolls-Royce stock price has been in a lull since hitting’s an intra-day high of 148.45p on September 27th. At the time of writing, it was about 6% below that mark. Momentum investors who invested in Rolls Royce two months ago are definitely enjoying the view from the top. However, it has recently stayed in a range for too long, it seems.

What could break the deadlock?

Lest you forget, RR is still heavily burdened by debt, which could weigh down its performance in the long term. With debts debt currently adding up to around £3 billion, a looming interest rate raise by the Bank of England could spell trouble for the company.

The €1.7 billion sale of Rolls’ Spanish company, ITP Aero, is a major factor in the recent price increase. Another significant development is the recent announcement that Rolls-Royce has won a six-year contract, potentially stretching to 17 years with the US Air Force to produce engines for the F130 planes.  The company will need such contracts coming to keep a healthy balance sheet.

Global air travel recovery key to long-term growth

 The global airline industry’s comeback could bring much more good news. Increased air passenger kilometers would boost revenue and cash flow for RR. Averted flight disruptions are possible if the coronavirus can be contained. Both of these outcomes are promising.

Technical analysis

Rolls Royce share price is still trading within a tight range, which stretches back 3 weeks. During that period, the RSI has fallen sharply from 74 to the current 52, underlining a weakening momentum.  In addition, the signal line went above the MACD line 7 days ago, and has steadily gone further up.

Therefore, the market is evidently bearish on the asset.  With that in mind, Rolls Royce shares may only rise marginally to encounter the first resistance at 142.62p and only go as high as 145.18p where it will encounter the second resistance. On the downward side, it is most likely that support will be at a weekly low of 137.52p.

Rolls royce share price daily chart