Rolls-Royce share price forms a bearish divergence, rising wedge

Rolls-Royce Holdings (LON: RR) share price strong rally has stalled recently as bulls take a breather. After peaking at $232.3 on September 15th, the stock has retreated slightly to the current 215p. The shares have done well in the past few months as they jumped by more than 240% from the lowest point in September.

Rolls-Royce Holdings has been one of the best-performing FTSE 100 stocks this year. The stock has done well for three main reasons. First, the company started the year with a new CEO, who is now implementing a turnaround. His strategy involves focusing on the company’s profitability and reducing bureaucracy.

Second, Rolls-Royce has benefited from the ongoing recovery of the civil aviation industry. Most airlines have reported strong financial results this year, with their flying capacity sitting at their pre-pandemic levels. 

Third, the company is benefiting from the ongoing war in Ukraine, which has led to robust defense spending. Also, Rolls-Royce has been selected as one of the key contractors of the small modular nuclear reactors.

Rolls-Royce Holdings has published strong financial results. Its revenue rose from over £5.3 billion in the first half of 2022 to over £6.95 billion in 2023. Its gross profits rose to over £1.51 billion while its operating profit jumped to £673 million. As a result, its profit after tax came in at £404 million.

Now, the Rolls-Royce share price has stalled as investors wait for the next update by the management. This update will happen in Capital Markets Day on November 28th. Analysts expect the company continued doing well.

The challenge for Rolls-Royce Holdings is that inflation is still persistent. Most recently, the price of crude oil has jumped, which is impacting the cost of jet fuel. As a result, companies like American Airlines have reduced their guidance. This trend could affect other airlines.

RR chart by TradingView

The daily chart shows that the RR stock price has stalled in the past few weeks. It has remained above the 50-day moving average while the Relative Strength Index (RSI) has formed a bearish divergence pattern. 

Rolls Royce share price has formed a rising wedge pattern, which is one of the most popular bearish signs. It has moved below the lower side of this wedge. Therefore, the stock will likely remain under pressure in the coming weeks. If this happens, the next level to watch will be at 200p, which is ~7% below the current level.

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