- Rolls-Royce share price has continued its strong downward trend this month.
- GE Aerospace published a strong earnings report, a sign that demand is strong.
- There is a likelihood that the company will release strong earnings report in November.
Rolls-Royce share price is attempting to bounce back after crashing to its lowest level since June 12 earlier this week. It rose to 1,327p on Tuesday, a few pips above this week’s low of 1,294p. Still, technical analysis suggests that the stock has more downside risk in the near term as crude oil and jet fuel prices continue rising.
Rolls-Royce Stock Steady as GE Aerospace Drops
RR share price held relatively steady, even after GE Aerospace published strong numbers, suggesting that the industry continues doing well. GE Aerospace said that its orders jumped by 49% to $19 billion in the quarter, with its revenue rising by 18% to $13.3 billion. Its operating profit rose to $3 billion.
GE Aerospace is often seen as the closest competitor to Rolls-Royce Holdings. The two companies make most of their money in the civil aviation and defence industries, where they manufacture engines. A key difference is that Rolls-Royce specializes in wide-body engines, while GE has a large presence in the narrow and wide body engines.
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These results, therefore, demonstrated that the civil aviation industry is doing well despite the challenging environment. For example, crude oil prices continue to rise this week, with Brent nearing $112 and jet fuel prices rising by over 4.3% from a month earlier. Higher fuel prices may push its airline clients to cut back on trips, especially to the Middle East.
The results suggest that Rolls-Royce will also release strong numbers in November. In its last results, the company predicted that its annual operating profit would be between 4.7 billion and 4.9 billion pounds, while its free cash flow would be between 3.8 billion and 4 billion pounds. The company will likely boost its guidance in this report as it has done in the past.
Rolls-Royce Share Price Technical Analysis
Rolls-Royce shares chart | Source: TradingView
Turning to the charts, we see that the stock has been in a strong sell-off this month and is now trading at its lowest level since June. It has dropped below the important support level of $1,336, its lowest level in July this year. Moving below that level confirmed the view that bears have prevailed.
Rolls-Royce shares have slumped below the 50-day Exponential Moving Average (EMA) and the strong, pivot, reverse level of the Murrey Math Lines tool. Therefore, the stock will likely continue falling in the near term, potentially to the ultimate support level of 1,250p.
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