Stock of the day: Rolls-Royce

This Tuesday we’ll be looking at Rolls-Royce, which we previously analyzed on March 18^th. Back then, we were bearish and were expecting a movement to the downside:

“As I said, we’re now inside of the pennant (green). It’s a trend continuation pattern, so it should result with movements to the downside. I say, ‘should’, which doesn’t mean it necessarily has to. For a proper sell signal, we need to see the price closing a day below the lower line of the pennant first. And this scenario is very likely to happen.”

Well, what happened later was not so obvious at that time. First, the price escaped to the upside but it was a false breakout and later, the RR dropped significantly. At the end of April, Rolls-Royce managed to even break the crucial, long-term horizontal support at 0,86 (orange), setting lows at 0,78 at the beginning of May.

That was it, the second half of May brought us a reversal and this reversal actually cancelled the long-term sell signal, giving us a proper buy signal. What we have now is a false breakout of the 0,86 support and a breakout of the mid-term dynamic resistance (black). The Price Action tells us that this is a buy signal. The current target is at 1.05 (green) and chances that we will get there are quite high.