The Rolls-Royce share price had a mixed month in July. The stock started the month well as investors priced in strong demand for the company. This pushed it from a low of 94p to 106p. It then pared back those gains and declined to 86.6p. The shares then rebounded by more than 20% and then ended the month at 99.7p.
Rolls-Royce Holdings earnings
August will be an important month for Rolls-Royce share price for two main reasons. First, the company is set to publish its half-year results this week. These results will provide more colour about its business in the second quarter and in the first half of the year.
The company likely had a difficult first half of the year. As expected, the bank will remain in the red as the number of orders remained weak. The firm will also report challenges relating to higher cost as inflation rose in the first half of the year. However, going by the strong General Electric earnings, the firm will likely report better orders than in the first half of 2020.
The firm is also benefiting from the slow recovery of long-haul flights. Last week, the UK announced that it will accept flights from the US. This was a beneficial thing for Rolls-Royce and other airlines that move people across the two countries.
Most precisely, data compiled by Reuters shows that analysts expect that the firm’s revenue dropped to $5 billion in the first half from $5.6 billion in the first half of 2020. They also see its EBITDA rising from a loss of 1.57 billion pounds to more than 156 million pounds. Going by the recent earnings by companies like IAG, United Airlines, and Ryanair, the aviation sector is seeing a strong recovery.
August will be important because of the Covid situation. If the number keeps rising in key markets like US, UK, and Australia, we could see countries resume their lockdown measures. This will in turn be a bad thing for the Rolls-Royce stock price.
Rolls-Royce share price forecast
The daily chart shows that the RR share price has formed an Elliot wave pattern. The stock has already completed the first, second, and third parts of the impulse wave. It is now at the fourth wave, which is usually bearish. Notably, the stock has already retested the 61.8% Fibonacci retracement level.
Therefore, I suspect that the stock will likely rebound in August. If this happens, it will likely move above July’s high of 106p, which is about 5% above the current level. On the flip side, a drop below the 50% retracement at 99p will invalidate the bullish view.