IAG share price nears death cross as it faces a double whammy

IAG share price continued its strong downward trend today, March 18, its fifth consecutive day in the red. It has slumped from the year-to-date high of 463.6p in February to the current 351p, and this trend may continue as the company faces a double whammy of high energy prices and flight disruptions.

British Airways owner is facing major challenges 

IAG, one of the biggest airlines in the world, is facing one of its biggest crises since the pandemic as energy prices jump and supply disruption continues.

Crude oil prices continued rising on Monday, with Brent and the West Texas Intermediate (WTI) moving to $105 and $98, respectively. 

As a result, data compiled by IATA shows that the average jet fuel price jumped by 64% from the same period last month. It jumped to $157 a barrel, with Asia and Oceania being the most affected. Europe, Middle East, and North America jet fuel prices have jumped to $163, $154, and $149, respectively.

These numbers mean that airlines will spend more money in fuel in the coming weeks as the Iran war continues. The most affected airlines are those that had not hedged their oil input.

IAG is also facing a demand issue, especially for its Middle East routes, where many people have paused traveling amid the ongoing Iranian war that has spread across the region. Iran has continued to attack key areas, including Dubai Airport, which was shut down temporarily earlier today.

Airlines have been forced to increase fares and introduce surcharges to compensate for the soaring crude oil and jet fuel prices.

This war disrupted IAG’s business at a time when its business was doing well amid the transatlantic route demand. Its most recent results showed that its revenue jumped to a record high of €33.2 billion, while its operating profit before exceptional items rose by 13.1% to €5.02 billion.

IAG also continued returning funds to investors through its dividend and share buybacks. It launched a €1.5 billion share buyback, higher than the €1 billion it launched last year. IAG also continued to grow its dividend.

Looking ahead,  IAG stock price performance will depend on the progress on the Iran war. Donald Trump has maintained that the war will continue for a while, while Iran has rejected claims that it was interested in talks. Iran has also hinted that it will continue with the war even when the US decides to end the war, a move that will push oil prices higher for longer.

IAG share price technical analysis 

IAG stock price chart | Source: TradingView 

The daily timeframe chart shows that the IAG stock price has crashed in the past few weeks, moving from a high of 463p on February 27 to the current 345p. 

A closer look shows that the stock is about to form a death cross pattern, which happens when the 50-day and 200-day Weighted Moving Averages (WMA) cross each other. A death cross is one of the most common bearish reversal signs in technical analysis.

The stock has dropped below the Ichimoku cloud indicator, while the Supertrend has turned red. Also, the Relative Strength Index (RSI) and the MACD have continued falling.

Therefore, the most likely scenario is where the stock continues falling, potentially to the key support level at 300p.