Rolls Royce share price has risen for the last eight weeks in succession and the bullish momentum is still in play. Furthermore, the stock hit all-time highs of 901p on Thursday. However, with the sharp rise comes the risk of profit taking, which could stimulate downward pressure in the near-term. Nonetheless, a deeper assessment of the company’s fundamentals signals that there’s still more headroom for its share price to keep climbing.
The Average Directional Index (ADX) on Rolls Royce share price is at 28 on the daily chart and at 43 on the shorter 4-hour time frame. Combined with the RSI reading of 75, this set up points to a strong momentum that adds credence to the likelihood of a new all-time high in the near-term. However, these figures also signal overbought conditions that could limit the upside, as investors are increasingly inclined to tame their appetite and take profit.
Strong Orderbook, but with a Risk
Rolls Royce (LSE: RR.) reiterated its revenue guidance of £2.7 billion-£2.9 billion for 2025 in early May. In addition, it has since won a five-year £563 million contract to service Royal Airforce Typhoon aircrafts’ EJ200 engines. However, the bigger catalyst for its soaring stock is the recent Bloomberg report that highlighted the emergence of China as the next major market for Airbus.
Rolls Royce is a leading supplier of Airbus engines, and China’s soaring relations with the United States has seen it shift its attention away from Boeing. That brings Europe’s Airbus into the picture, which translates into a major revenue spike for Rolls Royce.
However, despite the strong orderbook, Rolls Royce faces rising supply chain and maintenance backlogs, with Airbus A350’s XWB engines and Boeing 787’s Trent 1000 engines impacted the most.
As of this writing, the Rolls Royce backlog stands at about 1,843 aircrafts’ engines. Also, rising global geopolitical conflicts also raises the prospect of increased demand for fighter jet engines. Therefore, continued struggles to meet rising demand is an underlying weakness for Rolls Royce share price despite its 56% year-to-date gains.
See also
Rolls Royce Share Price Prediction
Rolls Royce share price pivots at 880p and the momentum favours the buyers to stay in control. The stock will likely meet initial resistance at 901p, but an extended control by the buyers will break above that level and potentially test 910p.
Conversely, action below 880p will shift the momentum to the downside, with the first support likely to be at 866p. The upside narrative will be invalid if the price breaks below that level. Also, an extended control by the sellers could push RR price lower to test 851p.
