The EasyJet share price declined sharply on Wednesday as investors focused on the company’s recovery. The EZJ shares declined to 676p, which was about 7% below the highest level last week. Other airline shares like IAG and Ryanair have also declined.
EasyJet in focus
EasyJet has been in focus in the past few weeks after the company turned away an offer by Wizz Air. The management said that the offer significantly undervalued its business.
Instead, the company decided to raise capital through a share issue in a bid to boost its balance sheet and invest in its growth.
In another statement, the company’s CEO rebuffed a comment made by Ryanair, the biggest airline in Europe. The tough comment happened after the Ryanair CEO questioned whether EasyJet will be able to continue as a going concern by itself. He argued that combining with another budget airline will give the two companies the leverage they need to succeed
Meanwhile, the stock is falling as the company braces for more competition from British Airways. The company is in talks with its union in a bid to start a budget airline based in Gatwick. If the deal works out, analysts believe that it will take some market share from EasyJet, which has a strong market share in the UK.
EasyJet share price forecast
The daily chart shows that the EasyJet share price managed to rise above the descending trendline shown in red recently. The stock rose to a high of 722p but it has lost some of these gains. It is now trading at 673p, which is along the initial trendline.
Therefore, there is a likelihood that the stock has formed a break and retest pattern, which is usually a bullish signal. Therefore, there is a likelihood that the shares will resume the bullish trend since it has also formed an inverse head and shoulders pattern.
If this happens, the stock will likely keep rising as bulls target the next key resistance level at 800p, which is about 20% above the current level.
This view will be invalidated if the price manages to drop below the key support at 635p.