Stock of the day: Rolls-Royce

Carmakers are not having a great time right now. The Russian aggression in Ukraine is currently interrupting pretty much everything, the automotive business included. It’s not only about semiconductors. Since the beginning of November, the price of Rolls-Royce has been going down and it looks like this trend will continue.

The dominant structure on the chart right now is a big symmetric triangle pattern (red lines). The formation ended with a breakout to the downside and a legitimate sell signal. On the way, the price managed to break the horizontal support on the 1.07 (yellow) and reach the 0.87 support (blue).

After reaching this crucial support (blue), the price stopped and created a small pennant formation (green). We’ll come back to the pennant later but first let me tell you how important the blue line is. 0.87 has been a strong support since the end of 2020. We tested it a few times but the price didn’t manage to drop below that point.

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.