The S&P 500, Dow Jones, and Nasdaq 100 indices and their exchange-traded funds (ETF) future continued their strong downward trend on Friday. Futures tied to the three indices fell by 60, 275, and 265 points, respectively. 

This crash is a continuation of what happened on Thursday when they plunged by 0.63%, 0.65%, and 0.50%. Here are some of the top reasons why the indices are falling and whether it is safe to buy the dip. 

Stock market has crashed as regional banks tumble

The first main reason why the S&P 500, Dow Jones, and the Nasdaq 100 indices is the rising concerns about regional banks and the credit market.

Fears of the credit market have been going on for a while as the private credit sector has boomed. Data shows that over $1.5 trillion has moved to private credit sector, a figure that is expected to hit $3 trillion in the next few years. 

Fears of the credit sector have continued after the recent collapse of First Brands, which had over $12 billion in borrowings. 

The fears continued this week after Zions Bank and Western Alliance announced that they were victims of fraud. As a result, there are concerns that the industry could be in more trouble. 

These concerns have sent memories of 2023 when companies like First Republic and Silicon Valley Bank (SVB) crashed. This explains why the short interest in the SPDR S&P Regional Bank ETF has jumped to 30%.

Still, on the positive side, the two companies have cited fraud as the main reason for their woes, meaning that this is not a systemic issue. 

Government shutdown continues

The S&P 500, Dow Jones, and Nasdaq 100 indices have also fallen as concerns about the government shutdown continues. The Senate failed in its bid to have it open, meaning that the shutdown will likely go on for a while. 

This shutdown will have an impact on the US economy, with estimates suggesting that it is costing the GDP over $70 billion a week. 

Still, on the positive side, the longer the shutdown continues will raise the odds of the Federal Reserve cutting interest rates in the coming meetings.

US and China trade war

The other notable bearish catalyst for the three indices is that there is still a risk that the US-China trade conflict will go on for a while. 

China announced tariffs targeting US ship earlier this week. This was on top of the other retaliatory measures it announced last week. They included tariffs on US ships moving to China, limits to rare earth materials, and an investigation into Qualcomm.

Why the Dow Jones, S&P 500, and Nasdaq 100 will rebound

There are a few reasons why the three indices will bounce back after this crash ends. First, they will rebound as the issues in the regional banking sector are not systemic. 

Second, American companies have published strong financial results so far. This includes numbers by companies like JPMorgan, Morgan Stanley, Citigroup, and Wells Fargo. Analysts expect the earnings season will be better-than-expected.

Third, bond yield are falling, signaling that market participants expect the Fed to cut interest rates in the coming meetings. The stock market does well when the bank is cutting rates.

Additionally, history shows that the stock market normally bounces back after experiencing a drawdown. 

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The crypto market crash that started on Friday accelerated this week, with top coins being in the red. Bittensor (TAO) price plunged by 14%, while Aster, Immutable, Zcash, PancakeSwap, and DoubleZero being the top laggards. This article explains some of the top reasons why the crypto crash is happening.

Crypto market crash happened after last week’s liquidations 

The crypto market crash is happening as stocks jump as investors focus on last week’s liquidations. On Friday, over 1.6 million traders were liquidated, with the total amount rising to almost $20 billion. 

Some analysts, including Tom Lee, argue that the liquidation amount was much higher than the reported figure and pointed to the risk of leverage in the crypto industry.

Therefore, altcoins are falling as investors and traders keep off after the crash last week. Some people who were wiped out have opted to keep off the industry completely or to participate in it by just buying and holding Bitcoin.

This explains why liquidations have slowed despite the ongoing crash. CoinGlass data shows that liquidations dropped by 28% in the last 24 hours to $444 million. Also, the volume in the perpetual exchanges like Aster and Hyperliquid has dropped.

Altcoins falling as Fear and Greed Index retreats 

The other main catalyst for the ongoing crypto market crash is that investors have embraced a sense of fear. The Crypto Fear and Greed Index has plunged to the fear zone of 32, much higher than this month’s high of 55. 

This index looks at the overall sentiment in the crypto industry, including the market sentiment, price momentum, derivatives market, and volatility has plunged.

The fear is also happening in the broader market. Data compiled by CNN Money shows that the Fear and Greed Index has dropped to the fear zone of 30, with the stock price breadth, market volatility, junk bond demand, and safe-haven demand moving to the extreme fear zone. 

Put and call options and stock price strength have all moved to the neutral zone. Historically, the stock and crypto market normally underperforms when there is a sense of fear in the market.

Trade jitters and Federal Reserve impact

The crypto market crash is happening as investors focus on the ongoing trade issues between the United States and China. Recently, China has started to push back harder against the United States.

The country has rejected American soybeans, while announcing an investigation into Qualcomm, initiated export controls of rare earth metals, and warned of retaliation against any actions by the United States. 

All this will have an impact on inflation in the United States at a time when the Federal Reserve is thinking of cutting interest rates. Analysts expect that the Fed will cut rates in the coming meetings. 

Therefore, the trade jitters and inflation worries mean that the Fed will not cut rates at a faster pace as expected. 

Will crypto prices go back up?

Now, with the crypto market crash accelerating, the question is whether the prices will bounce back. History shows that crypto prices tend to bounce back after crashing in a certain period. 

For example, Bitcoin and the cryptocurrency market plunged after the tariff announcement on Liberation Day in April this year. A month later, the Bitcoin price rebounded and hit a new all-time high. 

Similarly, cryptocurrencies plunged at the onset of the Covid-19 pandemic and then staged one of the longest rallies after that. 

Additionally, there are potential catalysts in the crypto industry, including the upcoming altcoin ETF approvals, potential interest rate cuts, and buying the dip. 

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Barclays share price has moved sideways this week as investors focus on the ongoing earnings by its biggest American peers like JPMorgan, Goldman Sachs, and Morgan Stanley. BARC was trading at 380p, inside a range it has been in the past few days. This price is about 72% above the lowest level in April.

US bank earnings are tailwinds for Barclays 

A potential catalyst for the Barclays share price this week is the ongoing earnings by the biggest American banks, which have published strong numbers across the board.

Bank of America, the second-biggest bank in the US, published strong numbers, with its net income soaring by 23% to over $8.47 billion. This growth was driven by a 43% surge in its investment banking business, which made $2.05 billion.

Similarly, Morgan Stanley said that its revenue rose to $18.2 billion in the third quarter, higher than the median estimate of $16.7 billion. Its earnings per share was $2.80, also higher than the expected $2.10. 

The company’s fixed income, commodities, and forex had strong growth because of the recent volatility. Its investment banking revenue jumped by 44% to $2.1 billion, while the wealth management rose by 13% to $8.23 billion.

JP Morgan, to biggest bank in the US, also released strong numbers, with its investment banking revenue rising by 16% and its markets division growing by 25%.

Other American banks like Citigroup, Goldman Sachs, and Well Fargo released solid numbers, pushing their stock prices higher. The closely-watched SPDR S&P Bank ETF (KBE) and the Invesco KBW Bank ETF (KBWB) have jumped to their highest levels in months.

Implication for Barclays 

Results by American mega banks always imply Barclays because of their similar business models, especially in the important investment banking division.

These numbers mean that the company’s investment banking business will do well when it publishes its results later this month. The most recent results showed that the investment banking division made over £7.1 billion in revenues, a 13% increase from the same period last year. 

It was its second-best performing division after UK Corporate Bank, whose revenues rose by 14% to £1 billion. Barclays UK made £4.1 billion, while the private bank and wealth management made £697 million. 

A closer look at its investment banking division shows that its FICC and equities divisions rose by 23% and 16% in the first half of the year. Results by American banks mean that Barclays will keep doing well. 

The most recent consensus figure posted on its website shows that analysts expect that its total income rose to £7 billion in Q3, while the profit after tax rose to £1.65 billion. Its investment banking revenue is expected to be £3 billion in Q3, £12.9 billion, £13.1 billion, and £13.5 billion in the next three full years.

Barclays share price technical analysis 

The daily chart shows that the BARC stock price has done well in the past few months. It has jumped from a low of 221p in May to 380p today. 

Most recently, the stock formed an ascending channel and remained above all moving averages. It has also formed a small bullish flag pattern, which is a common continuation sign. 

Therefore, the most likely outcome is where the stock keeps rising, with the next key level to watch being the psychological point at 400p.

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Atlassian stock price continued its strong downtrend this month and is now hovering at its lowest point since August last year. TEAM plunged to a low of $149.40, down by 55% from its highest point this year. This crash has brought its market cap from over $85 billion to $40 billion. 

Why Atlassian stock price has plunged

Atlassian share price has been in a strong downtrend in the past few months as concerns about its growth have continued. Its downtrend has accelerated after the company launched its acquisition of The Browser Company, the creator of Arc and Dia browsers in a $610 million deal. 

It also recently acquired DX in a $1 billion deal. DX offers engineering intelligence and AI-driven productivity solutions. Atlassian hopes that these products will help to complement its existing solutions like Jira, Trello, Confluence, Loom, Compass, and Bamboo. 

The most recent results showed that Atlassian’s revenue rose by 22% in the fourth quarter to $1.13 billion. This increase brought its annual revenue to $5.2 billion, up by 20% from 2024.

Analysts expect that the company’s growth will continue to decelerate in the coming quarters. The average estimate among 28 analysts is that its revenue will grow by about 18% to $1.4 billion. 

The second-quarter revenue growth is expected to be 17% to $1.51 billion. Analysts believe that the annual revenue will be $6.17 billion, up by 18% from the last fiscal year, which is a sign that the company is losing momentum. 

The Atlassian stock price has also plunged because of the ongoing selling by insiders. Its insiders have executed 135 sells of 989,384 shares in the last 3 months. At the current price, they have sold shares worth over $148 million. These insiders, who include the CEO, have sold over 4 million shares worth over $600 million in the last 12 months. 

This selling, which seems coordinated, could be part of estate management. However, it is always hard to recommend buying shares of a company whose management is actively selling. 

TEAM stock valuation analysis 

Another common issue that has dragged the TEAM stock price has been in a strong downtrend is that it is highly valued. The forward price-to-earnings ratio stands at 34, which is higher than the sector median of 24. The PEG ratio has jumped to 1.70, much higher than other companies.

One of the best ways to value the company is using its rule-of-40, which looks at its growth and margins. The net income margin is minus 4.9%, while its revenue growth of about 22%. Therefore, there are signs that valuation concerns remain. 

Atlassian share price technical analysis 

TEAM stock price chart | Source: TradingView

The daily timeframe chart shows that the TEAM stock has been in a strong downtrend in the past few months. It has dropped from a high of $326 in March to the current $150. 

The stock has formed a descending channel. It has moved below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears are in control. 

The stock has formed a descending channel. Also, the Relative Strength Index (RSI) and the Stochastic Oscillator have continued falling.

Therefore, the most likely scenario is where it continues falling as bears target the key support at $100. A move above the resistance at $160 will invalidate the bearish view.

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Rigetti Computing stock price has gone vertical in the past few month, helped by the ongoing hype surrounding the quantum computing industry. This growth has pushed it from a penny stock trading below $1 into a $17 billion company. 

Why Rigetti stock price is soaring

Rigetti and other companies in the quantum computing industry, like IonQ and D-Wave, have been in a strong surge since 2024. These gains have happened as investors predict that this type of computing will be the next big theme in the technology industry. 

The thinking is that investors will start focusing on the quantum computing once the AI theme fades. This view has been supported by reports from top companies like McKinsey and Bain that have predicted that quantum computing will help solve some of the biggest solutions in the world today. This view is supported by top experts in the industry, like Michio Kaku, who have been working in technology for decades.

Rigetti Computing stock price surged on Monday as investors cheered a report by JP Morgan, which said that it would invest at least $10 billion in companies in sectors important to the US economy. This plan is part of the company’s $1.5 trillion strategy known as the ‘Security and Resiliency Initiative.’

On this, it will allocate cash to firms in areas like supply chain and advanced manufacturing, defense and aerospace, energy, and frontier technologies. Quantum computing is one of the frontier technologies. As such, investors believe that Rigetti could be one of the companies that will receive this investment.

RGTI exposes the quantum computing bubble 

Still, the main risk that Rigetti Computing stock faces is that the company is exposing the bubble in the quantum computing industry.

A bubble is defined as a situation where companies in a certain industry surge irrationally because of euphoria among market participants rather than strong fundamentals.

In Rigetti’s case, the euphoria is driven by the view that it will become one of the top players in the quantum computing industry. This surge is not supported by any fundamentals, especially now that the company has a market capitalization of over $17 billion.

The most recent results showed that the company made just $1.8 million in the second quarter, down sharply from the $3 billion it made in the same period last year.

Rigetti Computing made $3.2 million in the first six months of the year from $6.1 million in the same period last year.

The average estimate of the 7 analysts tracking the company is that its revenue this year will be $8.13 million, down by 24% from last year. They then expect it to make $21 million next year, a 164% annual surge, helped by the upcoming 100+ qubit chiplet.

Despite this, the company is expected to continue losing substantial sums of money in the long term. It will lose 18 cents per share this year and 16 cents next year. It is hard to justify a $17 billion valuation on a loss/making company with less than $30 million in annual revenue.

The options market also point to more downside for the company with the put-call ratio of 1.06, a sign that there are more put that there are more puts than calls.

Rigetti Computing stock technical analysis 

RGTI stock chart | Source: TradingView

The daily timeframe chart shows that the Rigetti stock price has gone parabolic in the past few months. It has now become highly overbought as the Relative Strength Index and the MACD indicators surging to their extreme levels. Highly extreme assets tend to pullback over time.

The stock has remained significantly above the 50-day and 200-day Exponential Moving Averages, meaning that it may go through mean reversion in the coming weeks as investors start to book profits.

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The crypto market remained on edge on Wednesday morning as investors focused on the ongoing trade conflict between the United States and China, the two biggest economies globally. The crash also happened as investors reacted to last week’s liquidations, which affected at least 1.6 million traders. 

This article provides a forecast for popular tokens like Aster, Shiba Inu (SHIB), and Pi Network (PI).

Shiba Inu price prediction 

Shiba Inu, the biggest meme coin in the Ethereum network, has come under intense pressure in the past few months as it crashed from last November high of $0.00003323 to the current $0.00001067.

All attempts to rebound faced substantial rejections in May, July, and September this year. As a result, the coin formed a descending triangle pattern whose upper side connects the highest swings in these three months. The lower side of this pattern was at 0.00001062. A descending triangle often leads to a strong bearish breakout.

Shiba Inu price crashed below the support on Friday as the crypto market crash intensified. It has now bounced back to this level as it formed a break-and-retest pattern, which is a common continuation sign.

Shiba Inu price remains below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears are in control. Therefore, the most likely scenario is where it continues falling, with the next point to watch being at $0.000000698, its lowest level on Friday. 

Aster price forecast 

Aster is a top cryptocurrency project that has become a major competitor to companies like Orderly and Hyperliquid. It is a perpetual DEX handling billions of dollars a day.

Aster has become a popular name because it was built by former Binance employees, and Changpeng Zhao, popularly known as CZ, has become an advisor. His YZI Labs has invested in the company.

Aster token price has come under pressure in the past few days after it suffered a major delisting from DeFi Llama, a popular data aggregator, which cited its wash trading practices.

The Aster price has plunged after peaking at $2.4350 in September to the current $1.4713. Aster price formed a giant double-top at $2.2696 and a neckline at $1.5075. A double-top is one of the most bearish patterns in technical analysis.

It has now formed a break-and-retest pattern by bouncing back to the neckline at $1.5075, where it is today. Therefore, the token will likely continue falling as sellers target the next key support level at $1.0940, its lowest point on October 10.

Pi Network price technical analysis 

Pi Network price has been in a strong downward trend since February this year, when the developers launched the mainnet. The crash happened as many pioneers who were mining the token for years sold them. 

It also happened as the number of tokens being unlocked jumped, which led to substantial inflation in the network. Most importantly, Pi Network does not have any utility, with just a handful of people using apps in its network. As such, it has not achieved the goal that the developers set in the first place.

After initially peaking at $3 in February, the token plunged to an all-time low of $0.1538 on Friday.

Pi Network price then rebounded slightly to the current $0.2135. It has moved below the 50-day and 100-day Exponential Moving Averages (EMA).

The token has also formed a bearish flag pattern, which often leads to more downside. Therefore, barring any new development, the token will likely continue falling as sellers target the next key support at $0.1538 followed by the psychological level at $0.100.

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The Metaplanet share price has been in a strong downward trajectory this year, and is now hovering at the lowest point since May this year. It has plunged by over 70% from its highest point this year, erasing billions of dollars in value. This article explores why it is in freefall.

Metaplanet share price has crashed as Bitcoin treasury companies dive

The Metaplanet stock price has been in a strong downward trajectory as investors sour on Bitcoin treasury companies, with some investors describing this as the bursting of the treasury bubble. 

Michael Saylor’s Strategy stock price has plunged by 35% from its highest level this year and by 45% from its highest point in 2024.

MicroCloud Hologram stock price has plunged by over 98% from its highest level in December when it unveiled its Bitcoin treasury strategy. Other companies that have plunged this year are the likes of Bullish, Trump Media, and Semler Scientific.

One possible reason for this industry-wide crash is that the industry has become highly saturated, with the number of treasury companies rising. In most cases, the companies adding Bitcoin to their holdings are firms that have gone through a rough patch.

Falling mNAV ratio 

The other main reason why the Metaplanet share price has plunged this year is that its premium has continued to narrow such that the enterprise value dropped below its Bitcoin holding for the first time on Tuesday.

The mNAV has been in a strong downward trend after peaking at over 22 earlier this year. A falling premium is an important thing to Bitcoin treasury companies that depend on raising money to accumulate.

Ideally, the cost of capital when a company has a high premium is low compared to when the mNAV is falling. For example, MicroStrategy had a policy to never sell shares when the mMNAV was below 2.5 as that meant more dilution. It recently changed this policy as the NAV fell.

Continued dilution of investors 

Further, the Metaplanet share price has collapsed because of the ongoing dilution of shareholders as the company continues to raise cash to buy Bitcoin.

Metaplanet’s shareholders recently gave it an approval to raise cash through share sales and preferred shares. Raising cash through share sales leads to dilution. In Metaplanet’s case, the number of outstanding shares jumped to 654 million today from 114 million last year.

Raising cash through selling preferred shares involves selling a certain class of shares, with the holders receiving a dividend. The challenge is that raising this capital is not easy especially when the mNAV has plunged. This likely explains why Metaplanet has not bought any Bitcoins recently.

Metaplanet stock price has formed a death cross pattern 

The daily timeframe chart shows that the Metaplanet stock price has been in a strong freefall after peaking at ¥1,932 in June this year. It has continued to make a series of lower lows and lower highs in this period  

The stock has plunged below the important support level at ¥709, the highest swing in February this year. This week, it moved below the important support level at ¥500, which is both a psychological level and the lower side of a small double-bottom pattern whose neckline is at ¥665.

The stock has now formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) have crossed each other. A death cross is one of the most popular bearish continuation signs in technical analysis.

The Relative Strength Index (RSI) has continued falling and is nearing its oversold level. Therefore, the most likely scenario is where the stock continues plunging, with the next target level being at ¥297, the lowest level in April this year.

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The Indian rupee surged on Wednesday as investors reacted to reports of a potential deal between the US and India and the several dovish statements from Federal Reserve officials. The USD/INR pair plunged to a low of 87.92, down sharply from the year-to-date high of 88.86.

Indian rupee jumps amid rising hopes of a trade deal with the United States 

The Indian rupee has been in a strong uptrend in the past few months as investors reacted to the ongoing trade war between the US and India.

Donald Trump’s administration has put in place a 50% tariff on Indian goods, partly because the country continues to import Russian oil in huge quantities.

The crisis escalated last month when the US announced a surge in the H1-B visa fee to $100,000, a move that will disproportionately affect India, which has a 70% share. 

Now, according to Bloomberg, there are signs that India is accelerating its trade talks with the United States with a goal of reaching an agreement by November this year. Narendra Modi’s government hopes to reach an agreement that is mutually acceptable to the US, especially on Russian oil.

Bloomberg noted that the Russian oil issue is the main sticking point and that the other issues have been resolved.

A trade deal between the two countries would be a good thing for the Indian economy, which sells goods and services worth billions of dollars to the US. It would also ensure that dollars continue flowing to the country from the United States, especially if the H1-B visa issue is resolved.

Talks between the two countries have accelerated in the past few months, with teams from the US visiting New Delhi in November. Some of the potential concessions that India has made are buying genetically modified corn from the US. India will also buy more military equipment from American companies.

Dovish Federal Reserve statements

The USD/INR exchange rate also plunged after a series of dovish statements from some Federal Reserve officials, including Jerome Powell, the chair.

In a statement on Tuesday, Powell noted that the bank was concerned about the labor market, which has deteriorated in the past few months. A report by the Bureau of Labor Statistics in September showed that the economy created just 22,000 jobs in August.

The BLS has not released its official jobs report this month because of the ongoing government shutdown in the US. As such, investors and policymakers are focusing on the private sector report by ADP, which showed that the economy shed over 36,000 jobs last month.

Other Fed officials pointed to more interest rate cuts 4 this year. For example, Susan Collins, the head of the Boston Fed said:

“Even with some additional easing, monetary policy would remain mildly restrictive, which is appropriate for ensuring that inflation resumes its decline once tariff effects filter through the economy.”

Other Fed officials like Michele Bowman, Christopher Waller, and Raphael Bostic have all sounded optimistic on the need to cut interest rates soon. However, some officials believe that inflation is still too high and cautioned against more cuts.

USD/INR technical analysis 

The daily timeframe chart shows that the USD/INR exchange rate crashed to a low of 87.98 on Wednesday as the Indian rupee jumped. Its lowest point coincided with the highest point in February this year.

The pair has, therefore, formed a break-and-retest pattern, which is a common continuation sign. It remains above the 50-day and 100-day Exponential Moving Averages (EMA). It has also formed a hammer candlestick pattern.

Therefore, the pair will likely resume the uptrend and possibly retest the all-time high of 88.86. This rebound will likely happen if the deal between the US and China is delayed.

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The ASML share price rose on Wednesday as the company published strong financial results that demonstrated demand in the artificial intelligence industry. It was trading at €846, up by about 67% from its lowest point this year, giving it a market capitalization of over €337 billion. 

ASML earnings download

ASML is a top company in the technology industry that makes large equipment used to manufacture computer chips. It is the only company with the capacity to manufacture lithography tools used by firms such as TSMC, Global Foundries, and Intel in their manufacturing processes. 

ASML has benefited substantially from the ongoing artificial intelligence (AI) boom that has led to a substantial increase in chip demand. 

The company’s results, which were published today, showed that the company made €5.4 billion in bookings in the third quarter, higher than the average estimate of €4.9 billion. 

Read more: Mistral AI secures €1.7 billion as ASML becomes top backer

Its total sales jumped to €7.5 billion in the quarter. It now expects that the fourth quarter revenue will be between €9.2 billion and €9.8 billion, with its gross margin being between 51% and 53%. 

ASML has continued to reward its shareholders. It declared an ordinary dividend of €1.6 per share and repurchased shares worth about €148 million. It has already repurchased shares worth about €5.9 billion in the ongoing €12 billion program. In a statement, the management said:

“In line with our plans to support our customers in the 3D integration space, we shipped ASML’s first product serving Advanced Packaging, the TWINSCAN XT:260, an i-line scanner offering up to 4x productivity compared to existing solutions.”

ASML is fairly valued

ASML stock price has done well in the past few years as demand from the industry soared. This demand will likely continue after the recent announcements in the AI industry. 

For example, Broadcom has reported a backlog of over $455 billion. Nvidia has announced a $100 billion investment in OpenAI, while OpenAI has announced a big investment in AMD. 

Data shows that the company is fairly valued considering its important role in the AI industry. The company has a forward price-to-earnings (P/E) ratio of 35, and a PEG ratio of 0.88. 

ASML share price technical analysis

The daily chart shows that the ASML stock price has rebounded in the past few weeks, moving from a low of €500 in April to €840 today. 

It formed an inverse head-and-shoulders pattern, which is a common bullish reversal sign. It has moved above the important resistance at €742, the pattern’s neckline. 

The stock has also formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. It has also formed a bullish flag pattern and moved above the 61.8% retracement point. 

Therefore, the stock will likely continue rising as bulls target the psychological point at €1,000. A drop below the support at €814 will invalidate the bullish view.

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The Rolls-Royce share price has pulled back in  the past few days, moving from the year-to-date high of 1,195p to the current 1,115p, as investors book profits as they wait for the upcoming trading update in November. So, will the stock crash to 1,000p or rebound to 1,200p?

Rolls-Royce share price technical analysis 

The daily timeframe chart shows that the RR share price has retreated in the past few days, moving from a record high of 1,200p to a low of 1,115p.

This pullback happened as it neared the important resistance level at 1,200p. It is common for a stock to retreat before hitting key resistance levels.

The retreat happened after it formed a rising wedge pattern, which is characterized by two rising and converging trendlines that reached their convergence in September. This pattern is one of the most common bearish reversal signs in technical analysis.

Rolls-Royce share price has also formed a bearish divergence pattern. The Percentage Price Oscillator has moved from 7.7 in March and is about to cross the zero line. Its histogram have remained below the zero line since October 2.

The Relative Strength Index (RSI) has also formed a bearish divergence pattern as it has continued falling even as the stock rose to a record high.

Therefore, the most likely scenario is where the Rolls-Royce stock price continues falling in the near term as investors wait for its earnings. Such a move will likely see it plunge to the psychological level at 1,000p. 

On the flip side, a move above the year-to-date high of 1,196p will point to more gains to 1,200p and above.

Rolls-Royce business is doing well 

The Rolls-Royce stock price has been in a strong uptrend in the past few years as it faced numerous tailwinds across its businesses.

It benefited as the civil aviation industry rebounded after the COVID pandemic. Most airlines have already gone back to their pre-pandemic levels, and orders for new aircraft has jumped in the past few months.

The company’s defense business has continued doing well in the past few years as European companies have boosted their spending.

Most importantly, the Small Modular Nuclear business has become a crown jewel in its operations. It has already inked a deal with the UK government, and chances are that it will enter similar deals with companies, especially in the data center industry. Similar companies in the sector, like Oklo, NuScale, and TerraPower, have received multi-billion-dollar valuations. 

Analysts anticipate that the company’s business will continue growing over time. The average estimate is that its revenue this year will be £19.5 billion, while the free cash flow will hit £3.17 billion. 

These numbers are expected to keep growing, with the revenue set to hit £21.5 billion in 2026, £23.3 billion in 2027, and £25.35 billion in 2028. 

The free cash flow is also expected to be about £3.5 billion, £4.17 billion, and £4.6 billion in the next three years. Barring any major event, chances are that the company will beat estimates as it has done in the past. 

At the same time, while Rolls-Royce is not cheap, its valuation is not all that extended. With a market cap of over £92 billion and an estimated FCF of £3.1 billion this year, the company has a price to FCF multiple of 29. 

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