EasyJet share price chart pattern points to more downside

EasyJet (LON: EZJ) share price has been a bit boring in the past few months even as aviation companies continued thriving. The shares peaked at 534p on May 19th and then retreated to a low of 407p in August. They remain over 63% from the lowest level in October.

Jet fuel prices rising

EasyJet is one of the most popular regional airlines in Europe and is the second-biggest player in the sector after Ryanair. It has over 320 Airbus planes and flies over 1,000 routes in Europe.

Most importantly, it has one of the best balance sheets in the industry with just £2.8 billion in debt and over £3.4 billion in cash. It has over £10.45 billion in total assets against £8.6 billion in total liabilities. It reduced its debt by over $950 million.

EasyJet is also seeing robust revenue growth. The most recent results showed that the company’s profit jumped to £203 million in its fiscal third quarter. That was a strong improvement since it made a big loss last year. 

As a low-cost carrier, the company will continue attracting more customers since its prices tend to be extremely cheap. However, the biggest challenge for EasyJet is that the price of jet fuel is rising. 

Fuel has jumped in the past few months because of the soaring crude oil price. Brent has jumped to $92 while WTI is nearing $90. And the most recent data by IAT shows that the average jet price jumped by more than 1% last week, The average jet oil price has risen from $336.7 on August 11th to $349 and the situation could worsen.

Airlines like EasyJet and IAG use hedging tools to limit their exposure to jet fuel fluctuations. However, in most cases, as we saw last year, higher prices tend to have a major impact on their operations. And as we wrote here, American Airlines became the first major airline to flag the jet fuel risks.

EasyJet share price forecast

The daily chart shows that the EZJ stock price remained in a tight range in the past few weeks. It has remained between the important support at 466p and resistance at 521p. The shares made a bearish breakout below the support at 466p on July 21st and moved to the support at 407p, the lowest level in January.

EasyJet stock price has also formed a break and retest pattern by retesting the resistance at 466.3p. In price action analysis, this is one of the biggest signs of a bearish continuation. Therefore, there is a likelihood that the shares will resume the downward trend and retest the support at 400p.