The Royal Mail share price jumped 2% to its best trading day in two weeks. The question is, will RMG resume course lower or is this the start of a recovery?
Royal Mail plc(LON: RMG) reclaimed the 500p mark yesterday, finishing at 502.40p, higher by 9.40p (+1.91%).
Positive trading days have been few and far between recently for RMG. After setting a three-year high of 613.80p in June, the shares have been steadily declining. By Monday, the Royal Mail share price was more than 20% below June’s peak and appearing that it wanted to head lower still. Although investors will welcome yesterday’s green candle, it doesn’t suggest more will follow.
RMG price forecast
Looking at the daily chart, we see that RMG has broken down from a descending wedge pattern. Furthermore, after sliding below the trend support at 513p, RMG retested the level before reversing. This is considered bearish and validates the trend resistance.
Furthermore, the price is below the 50-day moving average at 558.40p and the 100 at 538.30p, reinforcing the negative sentiment.
However, RMG reversed Monday’s decline at 488.40p. This may be significant, as this was a good level of support in April before the price rallied to 2021s high.
Additionally, the relative Strength Index has started to turn higher from last week’s oversold reading. Currently, the indicator stands at 34.56 and may signal the price may find some technical support.
However, as long RMG is below trend resistance, the outlook remains weak. A logical downside target is the 200 DMA at 453.60p, where I would expect to see strong support.
In saying that, if the price recovers the trend line, the bearish outlook becomes invalid. And in this event, bulls may aim for the 100 DMA at 538.30p.
Royal Mail price chart (Daily)
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