Shares of Rolls-Royce decline after JPMorgan places the engine company on negative catalyst watch

Rolls-Royce Holdings PLC (LON: RR) Shares fell on Tuesday after analysts at JPMorgan placed the engine maker on their “negative catalyst watch,” citing expectations that the company’s new chief executive will issue a warning about its financial performance next year.

In a note to clients, the analysts said they believe incoming CEO Tufan Agrobiologic will move to prepare investors for “further restructuring or measures to improve the balance sheet” when he speaks to shareholders in February. They added that Agrobiologic is also likely to flag weaker-than-expected free cash flow and a slower-than-anticipated recovery in engine flying hours.

Agrobiologic will take over at the helm of the British plane engine manufacturer in January, succeeding outgoing Chief Executive Warren East.

Shares in Rolls-Royce have slipped by nearly 25% over the past one-year period, as the group grapples with investor worries over the pace of the aviation industry’s recovery from the pandemic.

However, East said in November that Rolls-Royce remains well-positioned to handle potential headwinds facing the sector, and has repaid £2 billion (£1 = $1.2286) in debt taken on during the COVID-19 crisis.

The firm also backed its annual financial target for modestly positive free cash flow, low- to mid-single underlying revenue growth, and profit margin broadly in line with the 3.8% result registered in its prior fiscal year.

ROLLS-ROYCE TECHNICAL ANALYSIS DAILY CHART:

In the daily chart Rolls -Royce is currently trading in the up channel. Rolls-Royce is currently trading above 20 & 50 SMA.

RSI is in Buying zone which shows bullishness. And stochastic is suggesting no trend.

Rolls-Royce’s immediate support level is at 88.66 & resistance level is at 93.21

HOW TO TRADE IN THIS WEEK

Rolls-Royce is trading in an up channel; it will continue to trade upside until any reversal to the downside. So, remain bullish on it.

TRADE SUGGESTION: BUY AT 90.82, TARGET AT 93.70, SL AT 88.70