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EasyJet share price forms near-perfect pattern ahead of earnings

By:
on Jan 23, 2023
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  • EasyJet stock has formed an inverted head and shoulders pattern.
  • Focus shifts to the upcoming first-quarter earnings.
  • Analysts are optimistic about the European aviation industry.

The aviation industry is expected to have a better performance in 2023 compared to 2022. Inflation is falling, jet fuel prices are steady, and demand remains at an elevated level. Also, most people in Europe have learned to live with the ongoing Russia-Ukraine war. Therefore, the EasyJet (LON: EZJ) share price will be in the spotlight this week as the company publishes its financial results. Wizz Air will also publish its numbers on the same day.

Optimism abound

There is an air of optimism surrounding European airline stocks. EasyJet shares have jumped by ~64% from their lowest level in 2022. In the same period, Wizz (LON: WIZZ) has jumped by ~112% while Ryanair has soared by 50%.

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EasyJet will publish its financial results on Wednesday. In December, the company said that its load factor in December was 84.5%, which was a few points below the average analysts estimate of 90%. In its most recent results, the Hungarian airliner said that its loss before tax came in at 178 million pounds in 2022. 

That was a strong improvement from the 1.1 billion that it lost in the previous year. Its total revenue in the same period jumped from 1.5 billion to over 5.8 billion pounds. Therefore, the company’s first-quarter results will provide more color about its business outlook. 

EasyJet faces numerous tailwinds in 2023. First, while jet fuel is still at an elevated level, there is a rising possibility that it will be much lower than it was in 2022. Second, demand is expected to remain elevated as demand continues rising. Also, a decline in inflation could push people into more flying. 

Besides, as a low-cost airline, the company has more pricing power. This explains why I recommended investing in EasyJet compared to IAG in this article

EasyJet share price forecast

EasyJet share price

Turning to the daily chart, we see that the EasyJet stock has formed a near-perfect pattern. It has formed an inverted head and shoulders pattern, which is one of the most accurate reversal patterns. The shares have moved above the neckline of this pattern. 

Using trend-following analysis, we see that the 50-day and 100-day moving averages have made a bullish crossover pattern. It has also jumped above the 38.2% Fibonacci Retracement level. Therefore, the shares will likely continue soaring, with the next key resistance level to watch being at 500p. On the flip side a move beneath the support at 423p will invalidate the bullish view.