Rolls-Royce Holdings PLC Makes a Bullish Engulfing Pattern, How are the bulls placed?

Summary

  • Rolls-Royce Holdings PLC (LON: RR.) is up by 197.60 percent from October 2020 low of GBX 34.59.
  • Prices have taken crucial support from the Fibonacci retracement supply level of 161.8%.
  • ’s prices broke a downward trendline on the quarterly charts and sustaining above the trendline for the past 4 weeks.
  • The next long-term resistance levels appear to be at GBX 163.34 and GBX 176.00.

Rolls-Royce Holdings plc (LON: RR.) has made a significant upside move and trading up by ~197.60% from the low of GBX 34.59; however, overall, the stock is in a primary downward trend. The stock prices have completed a long ABC corrective pattern in October 2020 on the quarterly chart and recovered from lower levels. 

Understanding Rolls-Royce on a Quarterly chart

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group

Rolls-Royce prices broke a long-term upward trendline in March 2020 and trading below the trendline for the past 13 months. Prices took the support of the Fibonacci retracement supply zone at 161.80% extension level and recovered from there. It also formed a bullish engulfing candlestick pattern with decent volume support delighting the bulls.

Prices are consolidating for the past 4 months and broke on the out of a falling trendline resistance level GBX 105.30 in April 2020 as seen on the quarterly chart. The stock prices are sustaining above the breakout point for the past four weeks.  

Coming to the indicator signals, the momentum oscillator RSI (14-period) has moved up from an overbought zone to 36.75 levels on the quarterly chart, indicating the possibility of upside momentum in the prices. The immediate support levels for the stock appear at GBX 83.04 and GBX 34.78 while stock might find stiff resistance at GBX 163.34 and GBX 176.00.

RR. on a Short-Term Weekly Chart

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group

The stock prices are currently moving in a symmetrical triangle pattern and trading in between 21-period and 50-period Simple Moving Averages which creates ambiguity about the future direction. However, prices are continuously taking support of the 50-period SMA, which might be supportive for the price action.

Meanwhile, the momentum oscillator RSI (14-period) is hovering near to ~49 levels indicating indecision for the stock prices. Volume analysis is not able to present any concrete evidence for the future direction of the stock prices.

Based on the above chart analysis and technical outlook, Rolls-Royce Holdings PLC’s price seems to be in a range-bound movement from the short-term perspective. However, a breakout of the falling trendline on a long-term quarterly chart along with an increase in volumes moves the odds in the favor of bulls.

Comment


Disclaimer