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Ryanair below 200 DMA

A heatwave in northern Europe contributed to weaker-than-expected yields as potential passengers decided to stay home rather than seek sun elsewhere.

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Other factors said to have contributed to the full-year profit after-tax guidance being lowered to the bottom of the €570m-€600m range are increased price competition, weak economic conditions across Europe and weaker GBP/EUR exchange rates. A profit warning from Ryanair this morning still came as something of a surprise to investors, however, with the share price dropping 15% from the open. A combative plan has since been announced to reduce winter season capacity, which will cut full-year traffic from 81.5 million to 81 million.

The price of oil is another issue the company may have to contend with; something which the airline has had difficulty with in the past with respect to hedging strategies. As fears grow that military intervention into Syria is all but a done deal – recently bolstered by John Boehner and Hilary Clinton – the price has had a surge to the upside. Though the issue could plague the share price of all airline stocks over the coming months, this is one area that wasn’t, for a change, mentioned in Ryanair’s profit warning statement.

We are seeing a mild recovery for the company’s shares at the moment, as they bounce off the €5.75 per share mark. However the €6.00 level looks like it may be a problem for now. it is interesting to note that the share price is finding it difficult to break above the 200 hour moving average, and hasn't traded above that since 15 August.

With regard to the daily moving average, the share price has fallen below the 200 DMA for the first time in over a year. While trading below all three key moving averages, one tends to expect that there is increased bias to the downside for the stock. The 200 DMA may now act as resistance to upside – with the 38.2% retracement of 6.04 also causing problems. Any protracted downside could target the €5.59 per share (50% Fibonacci level).

Ryanair Holdings chart

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