- Rolls-Royce share price continued its downward trend today, Oct. 19, reaching its lowest level since June 12. Will the drop continue further?
- Rolls-Royce stock has slumped into a technical correction this month.
- GE Aerospace will publish its financial results on Tuesday this week.
- Technicals suggest that bears have prevailed, pointing to more downside.
Rolls-Royce share price continued its downward trend today, Oct. 19, reaching its lowest level since June 12. It has moved into a correction after falling by 16% from its highest point this year, with focus now being on the upcoming General Electric Aviation earnings report, which will offer cues on the aviation industry.
Rolls-Royce Share Price Dips Ahead of GE Aerospace Earnings
RR stock dropped as concerns about the civil aviation industry continue. A key concern is in the Middle East, where Houthis have forced Saudi Arabia to close some of its airports. Earlier this month, attacks from the group killed 13 people and injured hundreds of others.
These events, together with the rising crude oil prices, mean that the civil aviation industry may be affected. This is important because Rolls-Royce’s business largely depends on a healthy aviation sector since it makes most of its money by offering services to airlines using its engines.
The next important catalyst for Rolls-Royce shares is the upcoming GE Aerospace earnings on Tuesday. Its earnings are crucial because they help investors get cues on the state of the industry.
GE Aerospace is one of Rolls-Royce Holdings’ biggest competitors. The main difference is that Rolls-Royce focuses mostly on wide-body engines, while GE Aerospace supplies engines for both narrow-body and wide-body aircraft. A strong earnings report from GE Aerospace therefore raises the likelihood that Rolls-Royce will also post solid numbers in November.
Rolls-Royce stock is also falling because of the ongoing woes in the small modular reactor (SMR) industry. Most companies in the industry, like Oklo and NuScale, have slumped as concerns about the industry continue. Analysts warn that it will take years for it to become more commercially viable. Rolls-Royce has not reached any SMR deals since it reached them with the UK, Sweden, and the Czech Republic.
Rolls-Royce Stock Technical Analysis
RR stock chart | Source: TradingView
The daily chart shows that the RR stock price has slumped in the past few weeks, moving from 1,586p to 1,324p. It has dropped below the key support level of 1,325p, its lowest level in July this year.
The stock has dropped below the Strong, Pivot, Reverse level of the Murrey Math Lines tool. Also, the Average Directional Index (ADX) has jumped to 30.7, its highest point since January this year. Soaring ADX is a sign that the downward momentum is gaining strength.
Therefore, the stock will likely continue falling, with the next target to watch being the Ultimate Support level of 1,250p.