Chart of the week: are Rolls-Royce shares still a bargain here?
After doubling from their recent 17-year low, our chartist discusses the best way to trade the shares.
12th October 2020 09:43
by John Burford from interactive investor
After doubling from their recent 17-year low, our chartist discusses the best way to trade the shares.
As long-time readers know, I love bargains in shares. And recently, I have been finding some. So, with this share suddenly on many investors’ radar, is it another candidate for my Buy Low/Sell High list?
The glory days of aviation are long gone – but will return - and the engine-maker once sported a share price of £11 as recently as August 2018, but it has since collapsed to the recent low at the 100p area.
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There is currently a rights issue underway, which has implications for anyone buying and holding shares in Rolls-Royce Holdings (LSE:RR.), but trading in the shares is very active.
Favourable sentiment towards aviation is practically non-existent given the pandemic-mandated travel bans – and that is why my antennae are twitching.
Here is the long-term monthly chart:
Source: interactive investor. Past performance is not a guide to future performance.
What a fascinating chart! I have a clear ‘three down’ (corrective) wave off the February 2014 top at £14, taking it to set a possible Double Bottom with the 2003 low. Â
It is well said that investing in aviation stocks is like riding a rollercoaster.
So we now have a possible basis for a decent rally. But are there more clues on the shorter-term charts?
Source: interactive investor. Past performance is not a guide to future performance.
Indeed there are! Last week’s sharp reversal has very likely capped the five wave pattern in wave C, paving the way for a solid recovery given the huge momentum divergence at the recent low of 100p.
Very near term, there could well be a pull-back from the current 220p print, but I would consider that to be an even better opportunity to snap up a quality share in what promises to be in a place at the centre of a very dynamic sector up ahead. Revolutionary advances are being made in propulsion types and the near-term travel disruptions have created a very over-sold situation.
For more information about Tramline Traders, or to take a three-week free trial, go to www.tramlinetraders.com.Â
John Burford is the author of the definitive text on his trading method, Tramline Trading. He is also a freelance contributor and not a direct employee of interactive investor.
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