Ready for take-off in 2023

Rolls-Royce (LON: RR) share price recent recovery has stalled. The stock was trading at 88.82p on Monday, a few points below December’s high of 94.42p. It is about 38% above the lowest level this year, giving it a market cap of more than £7.7 billion.

Outlook for 2023

Rolls-Royce Holdings had a mixed performance in 2022. Its stock crashed from a high of 150p during the year to a low of 64.33p. This decline happened even as the key segments of its business boomed during the year.

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For example, civil aviation, its bread and butter, did well albeit with numerous challenges, including the summer flight cancellations and China’s Covid-zero strategy. The crisis in Ukraine and sanctions on Russia also pushed the prices of key materials like titanium to record highs. As a result, its aviation division experienced a slower recovery than expected.

On a positive side, airlines like Air India, United, and American increased their orders during the year. The most recent giant order came from Air India, which ordered 220 planes. While most of these planes will not use Rolls-Royce’s engines, they are signs that the industry is recovering.

Rolls-Royce Holdings also saw robust order intakes for its defence business following the invasion of Ukraine. Most countries in developed countries, including Japan, have vowed to invest more money on defence. As a leading player in the sector, the company will do well if these orders materialize.

2023 will likely be a better year for the company. For one, business and intercontinental travel is expected to recover during the year as inflation eases. At the same time, China is expected to recover at a faster pace as it ends the Covid-zero strategy. In a recent note, analysts at Euromonitor said:

“The recovering airlines industry and rising defence spending will support the faster growth of the aerospace sector in 2023.”

Rolls-Royce share price forecast

The daily chart shows that the RR stock price has staged a slow bullish trend in the past few months, as we wrote here. This recovery faded when it moved to a high of 95.22p, which was along the 38.2% Fibonacci Retracement level.

The stock’s uptick is still supported by the 25-day and 50-day moving averages while the  Relative Strength Index (RSI) moved below the neutral point at 50. It has also formed what looks like an inverted head and shoulders pattern.

Therefore, the stock will likely continue rising in 2023 as buyers target the 61.8% Fibonacci Retracement level at 120p. A drop below the support at 70p will mean that bears have prevailed and invalidate the bullish view.