Rolls-Royce share price forms a rare bullish pattern

Rolls-Royce (LON: RR) share price rally has stalled in the past few days in line with the performance of the FTSE 100 and FTSE 250 indices. It was trading at 144.78p, which is ~9.15% below the year-to-date high of 160p. The shares are about ~125.25% from the lowest level in October last year.

Mixed views by analysts

I have followed Rolls-Royce closely in the past few years. In my last article on the company, I predicted that the stock would continue soaring and hit the key resistance point at 200p. Recently, however, the stock’s remarkable comeback has faded amid a lingering banking crisis.

Analysts have a mixed opinion of where Rolls-Royce shares should be. In a recent note, analysts at JP Morgan warned that the company faced significant risks as it works to deleverage its finances. The worry is that this deleveraging will expose the civil aviation business in an unexpected risk. As a result, they reiterated their underweight position on the stock to about 70p, which is over 50% below where it is today.

The same bearish view was reiterated by analysts at Royal Bank of Canada, who also believe that the stock will drop to about 70p. On the other hand, several other analysts have been more bullish on the shares. Shore Capital, UBS Group, and Berenberg have a buy rating. 

UBS analysts expect that it will rise to 200p, citing the renewed recovery of Chinese travel. Recent data shows that aviation has rebounded, with analysts expecting that the sector will move to pre-pandemic levels in June this year. The analysts noted that:

“Having lagged the A330ceo recovery to date we are comforted that the engine has seen materially increased use as China has recovered.”

Rolls-Royce share price technical analysis

RR stock chart by TradingView

The daily chart shows that the RR stock price has been in a strong bullish trend in the past few months. Along the way, the stock has formed a cup and handle pattern that is shown in green. It is now forming the handle section of this pattern. In most periods, this rare pattern is usually a bullish sign. 

The stock has remained above all moving averages. Therefore, there is a possibility that the stock will have a bullish breakout in the coming months. A move above the year-to-date high of 160p will signal that buyers have prevailed. If this happens, the stock will jump to the key resistance point at 200p.