BAE Systems @ 355.6p, +4 (1.14%)
Interesting to see both R-R and BAE Systems up today. BAE seemed to mirror the markets movement (dipping towards the latter part of the day), but R-R kept its momentum.
There was no newsflow from either company but there was a general news release on Reuters (Link to Reuters: Britain reviews defence contract rules to cut cost) that the British Government is set to start an 18 month review of the defence contract rules as it seeks to cut spending by 8% over the next 4 years. The review will cover the "single supplier" contracts where only one supplier is invited to tender. Both R-R and BAE have been beneficiaries of this type of process in the past.
The slightly negative connotations don't seem to have affected either company today though.
Taking a slightly different tack to normal, the share price chart for R-R this year is looking interesting to me. And, although I am not really a Technical charting expert, I believe that the behaviours of investors do seem to concentrate at times and charts can be one of the most visible communicators of this.
As a result, I do find charts useful to understand the trend of a share price, particularly if I am unsure about buying or selling and any short term effect from the economy like, for example, talk of recession, austerity measures etc. which might affect the number of buyers in the short term but shouldn't have a significant impact on a company such as R-R in the longer term so, value will win out (one would hope).
Charts can only plot the historical results of investors behaviours but some of these patterns can be very strong and hence have an element of predictability about them that can provide a convincing forecast. As ever, there are many more variables that could be taken into account such as trading volumes so these should be considered before making a decision based on historical information.
At this point, I probably need to apologise to any Technical chartists out there (as I couldn't ever claim to be an expert) but looking at the chart for R-R, it does seem to be following a strong trading channel since the recent low point in 2008.
There are a couple of aberrations to this which might negate it from a strict technical understanding, but I have drawn a couple of parallel lines on the chart to illustrate my viewpoint (and it is only my viewpoint).
Similarly, if I was to look at the full horizon on this chart, it is surprising how close the share price is to re-establishing the trend with that of its previous uptrend that ended at the beginning of 2008.
It also struck me that drawing a line across the last 3 high points could possibly point to a concentration point coming as, if it was extended, it would eventually meet up with the lower of the 2 trend lines. To me this would suggest the views of buyers and sellers are coming together and there could be a breakout from that point.
Apart from being an investor in R-R, the main reason that this has caught my eye is that the trend has continued to be upwards despite the troubles of the last few months and on the 10th February Rolls-Royce is due to publish its final results (so where does that triangle point form?).
Significantly, these will be also be the last results with Sir John Rose at the helm so it would be fitting if they were positive enough for the FTSE 100 to give him the farewell he deserves after 14 years in the role of Chief Executive and during a time in which he has overseen the transformation of the company into a respected global business, and a champion for British manufacturing worthy of the Rolls-Royce name.
Fingers crossed!
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| R-R share price chart with trend lines estimated. |
Chart courtesy of Digitallook.
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