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Rolls-Royce rallies further

Back in March we wrote about Rolls-Royce as the share was recovering nicely. Targets were placed at the 259p/270p area on a 61.8% retracement measure and a simple extension. Clearing the 180p/200p zone was important from a charting point of view. The weekly chart below (top) shows the green oval at the former resistance area, and the Fibonacci retracement ratios. The 13-week and 50-week moving averages (red and blue lines, respectively) show some support levels above and below the green oval, and highlight the speed of the rally so far given the separation of the current price from the 50-week moving average.

Since our March blog the company continued to announce big profit targets and cost savings measures. Whether or not these pan out is what investors will judge over time. On the balance of the continued resurgence in the share, it seems that for now, investors are betting on the plans working out.

From a charting point of view, what do we do when in the immortal words of the crooner Barry Manilow, ‘it looks like we made it’? Take profits and call it a day?

The chart below may be worth looking at as well. This is the monthly chart on a semi-log scale to show the percentage moves in the share price. The flat purple line comes in around 330p and should mark a decent barometer of whether bull sentiment can continue to build for a push towards 400p again, with dreams of 500p and higher further out. Hmm… Bulls make money, bears make money, pigs get slaughtered, right? Still, to badly quote Train lyrics – “hey soul sister, I don’t wanna miss a single thing you do…”. In other words, the share price has risen a lot on good news and hopes of more good news. Technical targets have been met, so some profit notching or reweighting/evaluation of the idea makes sense. But, there is a chance that the share price could rise further. Keep some chips on the table and see if bullish momentum continues to extend? Technically, dropping below the green oval area of 200p/180p would not be a good sign….

Gerry Celaya

Chief Strategist

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