Date: 23 May 2019

Royal Mail yesterday announced figures for 2018/2019. In addition to a multi-billion-pound investment program, the company also announced a 40 percent cut in the dividend to 15 pence per share. This will have been a blow to many investors as the stock has lost massive value in the last twelve months.

The company hopes that the far-reaching investments will boost business again. Among other things, the investments will be used to build over a thousand new parcel stations.

The former monopoly company is struggling with the disintegration of its traditional business model. Demand for conventional mail has declined sharply since the spread of e-mail, the ever-stricter criteria of the Data Protection Regulations and restrictions in the marketing sector, are further constraining the business model.

The company is, therefore, striving to increase its parcel business to a share of 70 percent by 2024.

A look at the chart shows a downward movement that originated in mid-May 2018, at a high of over 632p. Since then, the stock has worked its way steadily down to close yesterday after a slide below the 205p mark in the 220p territory.

The level around 220p could be crucial for further development. If the bulls manage to lift the market above this hurdle, there could be resistance around 238p. Additional resistance may come at 250p and 266p respectively. If the bulls then keep control, the February high of 285p must first be bested before further possible resistance in the 300p range.

If the bulls are too weak and the market continues to fall, first support might be the 209p area. If the market falls further down, there could be further support in the 192p and 171p ranges.

The MACD oscillator is in negative territory. The MACD line and its trigger line are parallel, and the histogram is tracking the price movement.

 

RMG.UK - daily chart. Source: ActivTrader

RMG.UK Daily Chart | Source: ActivTrader

 

Written by Daniel Schuetz, External Analyst, ActivTrades

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