Will Rolls Royce's share price ever fly again?

Its army of shareholders will be hoping Rolls can turn things around after four lean years. Independent analyst Alistair Strang tries to make sense of the strange goings on.

One of the trite sayings attributed to Warren Buffett goes along the lines of; “If you’re not willing to buy a share and wait 10 years, don’t dare buy one for just a 10 minute trade!”

Blue-chip share Rolls-Royce Holdings (LSE:RR.) is tending to prove this statement, many folk assuming the 100p level would prove sacrosanct. Alas, this has not been the case, and now it’s getting as worrying as your next electricity bill.

Whatever is going on with Rolls Royce share price is all very strange. We’d assumed with Covid restrictions easing and jets once again flying, the share price would move in sympathy with the growth in air miles being covered. This assumption has obviously proven incorrect, the shares now trading in a zone where we can calculate an “ultimate bottom” around 24p, representing a price level below which we cannot calculate.

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Additionally, with Rolls Royce creating a new facility in France to produce engines for Dassault's shiny new Falcon 10X flagship, common sense indicated some optimism should enter the marketplace and affect the share price. It didn’t!

And then there’s the hype around Rolls and their new mini nuclear plants, produced on a modular basis and recently announced as being deployed in the Netherlands as the heart of the countries climate and energy policy for the future. It’s all looking quite exciting, especially as the reactors (just 16 metres by 4 metres) are reckoned to enjoy a lifetime of around 60 years.

Despite this plethora of potentials, we’re pretty far from confident about Rolls Royce's share price potentials for the immediate future, requiring to close a session above 84p just to give a modicum of hope for positive movements.

Currently, below just 73p calculates with the potential of reversal now to an initial 60p with secondary, if broken, at 54p. Some slight hope can be taken from the close proximity of these target levels as generally, this will signify a zone in which a bounce can be anticipated.

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The share price requires below 54p to enter the Last Chance Saloon, an area with an eventual ridiculous looking 24p awaiting.

What feels distinctly silly is giving such a negative outlook against a company which appears to show strong positives for the future. Perhaps Mr Buffett's 10-year rule shall prove firmly embedded in reality.

Past performance is not a guide to future performance 

To dwell briefly on the positive side of life, above 84p is supposed to provoke recovery to an initial 92p, exceeding the immediate Blue downtrend. Our secondary, if such a level is bettered, works out at 102p, but our rule of “Higher Highs” takes the price into a zone where a longer-term ambition at 149p calculates as very possible.

In summary, we don’t expect a visit to 24p, instead thinking this shall prove worth watching for the 60p area making itself known. Like many shares, it’s currently worth keeping an eye on, but perhaps cover them loosely.