easyJet share price bounce hits resistance

easyJet slumped 65% before bottoming out in mid-March, with the stock finding support at 494p after weeks of downward pressure driven by the economic impact of Covid-19 on the travel industry.

After hitting its March low, the stock has rebounded close to 40%, with the low-cost airline closing at 652p a share on Thursday.

The big question for easyJet’s share price in the coming weeks depends heavily on how long the Covid-19 pandemic persists and how deep its impact becomes for airlines, with Citi analysts warning that the industry faces punitive government bailouts earlier this week.

‘As government intervention seems an inevitability amongst the majority of the European airlines, the conclusion is that there will be no free lunch for any airline,' Citi analysts said in a note to clients.

‘Europe is simply less well-capitalised vs other historical crises and arguably worse prepared for such demands than in previous cycles.’

Citi downgraded its rating for easyJet from ‘buy’ to ‘neutral’ this week but stressed that the low-cost airline is firmly in the ‘middle of the pack’, with it more concerned about Germany’s Lufthansa and Air France-KLM, opting to issue the pair with a ‘sell’ rating.

easyJet: technical analysis

easyJet’s share price has fallen dramatically over the past two months. But it was already in a sideways movement over the longer-term, the shares having twice failed to push on through £15 level, according to Chris Beauchamp, chief market analyst at IG.

Dips in 2016 and 2019 found support in the 750p – 800p zone, but the latest decline has fallen below these levels. In addition, monthly momentum indicators such as stochastics and MACD have rolled over.

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While the hourly chart shows that the shares have recovered from the lows of last week, and in spectacular fashion (up 38%), the uptrend is encountering resistance at 684p.

This is around the lower end of the gap down from 13 March. A close above this head towards 800p and trendline resistance from the February highs. We have seen a higher intraday low this week, and if the price clears 700p the more bullish view will continue to emerge. A reversal below 550p would negate the bullish view and bring 500p and then 412p into view.

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