Rolls Royce share price seems to be in a never-ending uptrend as the stock broke above 300p on Tuesday. At the time of writing, the shares of the aviation giant stood at 300.8p which is their highest level in the last 4 years. The bull trend is supported by an increase in global travel demand and bullish guidance for the next year.
On Tuesday, LON: RR opened at 297.1p and continued to ascend as the day progressed. However, the rally seems to be overextended and a correction could be around the corner. With technical analysis, we can discuss a few possible levels of pullback.
The recent strength in the FTSE 100 index is also boosting investor confidence in the blue-chips like Rolls Royce shares. Another positive sign is the strong momentum in the US equity markets which have surged to fresh yearly peaks.
According to the most recent news, UBS maintains a bullish forecast on the Rolls Royce stock. On Friday, UBS affirmed its buy rating on the stock while raising its price target to £4.0 from £3.5. As a result, the shares of the jet engine manufacturer have turned green for the third consecutive week.
I was one of the very few analysts who accurately predicted the price target of 300p in my previous forecasts. I made that Rolls Royce forecast purely based on the technical analysis. However, the same analysis is now screaming for a deceleration in the uptrend.
If you look at the following LON: RR chart, you can see that the price is approaching a diagonal resistance, which connects the 2014 and 2018 peaks. Due to confluences, many investors like to take profits around such levels.
Therefore, I won’t be surprised if there is a healthy pullback from current levels. In case of the bullish continuation, the 325p-340p region may act as a major supply zone.
