The Rolls-Royce share price is bouncing back today as investors bet on the recovery of the airlines sector. The RR stock is trading at 101.42p, which is higher than yesterday’s low of 99p. It is still 21% below the year-to-date high of 128p.
What happened: Rolls-Royce and other companies in the civil aviation industry have been under pressure recently. This is primarily because investors have been concerned about the speed of recovery of the airline sector as the number of coronavirus cases in several continues keep rising.
India, the second most populated country in the world, is reporting more than 200k cases every day. The same is happening in countries like Brazil. Therefore, analysts believe that the industry will take a longer period to recover than earlier expected.
Still, recent data from airlines reveal that they are optimistic about the future. In a statement after releasing its quarterly results, American Airlines said that it would start hiring pilots as demand rises.
Also, the Rolls-Royce share price is rising as traders start pricing in a robust recovery of the aviation sector as most western countries increase their vaccination process. Indeed, the share prices of the top aviation companies have done well today. IAG is the best performer in the FTSE 100 while EasyJet shares have jumped by more than 3%.
Rolls-Royce share price forecast
In my last article, I predicted that the RR share price would likely dip to 96p. At the time, the stock was trading at 112p. This prediction was accurate since the shares dropped to 99p yesterday.
On the daily chart, we see that today’s jump has happened at an important level since the price struggled to move below it on March 24.
Notably, we see that the stock seems to be forming an inverted cup and handle pattern. In technical analysis, this is usually a continuation pattern. Indeed, the current bounce can be said to be the formation of the handle. As such, it can be said to be a dead cat bounce.
Therefore, in my view, the shares are still under pressure. This will see it resume the downward trend as bears target the next key support at 95p, which is about 5% below the current level.