Ryanair Needs To Refuel Before Going Higher

Ryanair (RY4B.DU) hit its short-term target, but has it got enough fuel to keep the move going? Also, today I’m taking a look at EuroSterling ahead of Tuesday’s economic data.

Ryanair
Last week I signposted a bullish sentiment in Ryanair and suggested a move higher to €3.28 and then €3.40. Friday’s price reached €3.65, but this was way beyond the upper Bollinger band so today’s reversal should have been no surprise. The price is currently languishing just inside the band at €3.45 and the RSI has trailed off from an overbought level of 71 to 64. So has it got the legs to hit June’s high of €3.86?

My guess is that yes, it has, but that the price will fall first. Here’s why:

1) Friday’s candle, a Bozu, confirms that resistance has been met in the uptrend,
2) The recent ascent has run ahead of itself; that gradient would be too steep for a credible trend line and there’s too much daylight between the price and both the 21-day moving average and the Parabolic curve.
3) The price has a fairly exciting time; after an up move of 65c, or 21%, I’d expect a bit more of a pullback than today’s. The 38.2% Fibonacci retracement of September’s low to high is €3.41; the 50% retracement is €3.33 and the 61.8% retracement is €3.26. The cosy relationship with its 21-day MAV suggests that the price could return to the lower end of that range without ruining the bull case.

If I’m wrong, the price will reverse today’s fall and test Friday’s high of €3.65. A push above there should make it odds on to test June’s high.

EURGBP

OK, so this currency pair is hardly at the sharp end of the adrenaline rush, but I’m going to be watching it carefully tomorrow morning. Tuesday sees the release of inflation numbers in France and the UK, RICS house prices in the UK and the German ZEW confidence survey (check out the Weekly Calendar for forecasts).

Since the end of August the price has rattled around a 130-pip range, very much a side-show to the main Dollar and Yen crosses. But August 18th, the last time we saw the UK CPI and German ZEW, produced a 100 pip fall on the day. All, or any, of these could give the EURGBP a jolt from its rather relaxed range.

Here’s how I’ll be approaching the numbers:

The chart favours further Euro strength; Friday’s Doji candle found support at the rising 21-day moving average, leading to a 60-pip rise today. The Parabolic curve is supportive and an RSI of 60 would allow the rally to continue up as far as the upper Bollinger band at £0.8880 (this level coincides with the 200-day MAV, which ought to act as resistance, at least in the short term.

But this could be a 2-stage move; I’d be happy to go long as far as £0.8840, but would want to see a confirmed break of that level before committing to a long trade to £0.8880. Also, check out the falling trend in the RSI. For me to believe a break higher I’d need to see any rally accompanied by a rising RSI.

If the data is supportive of Sterling (a fall in the price) I’d be happy to sell it down to the £87.30 area, but at that level I’d be watching the price movement around the 21-day MAV. If it holds, I’ll be looking to go long; if it breaks lower it could find £0.8650 hard work before testing the lower Bollinger band at £0.86.

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