Ryanair: turbulent times for the airline

While the fundamental outlook for budget airline Ryanair might be improving, the chart still looks quite bearish, even with the recent bounce from the lows.

Ryanair Source: Bloomberg

It has been a tough few months for airlines, and Ryanair is no exception. The profit warning in mid-January sparked off another drop in the share price, with the warning of lower fares for the winter hurting sentiment. In addition, the firm is warning of overcapacity on short-haul routes, a sign that prices are unlikely to rise soon.

Falling oil prices will provide a near-term boost, and an improved economic situation in Europe might also alleviate some of the overcapacity. At around 11 times forward earnings, the shares are at their cheapest level in almost three years, though the technical picture remains discouraging.

Since August 2017, the shares have lost ground relentlessly. However, they find themselves in a possible falling wedge formation, which has been in place since October. Resistance has been encountered around £11.00, and a fresh decline would target the recent lows around £9.27. Any sustained rebound needs to first breach the 50-day simple moving average (SMA) of £11.02 and then move on to clear the major zone of resistance around £12.75, which was support in August and September before becoming significant resistance in November.

Ryanair chart

Ryanair chart

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