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One of the biggest intra-day movers on the UK 100 this week was engine maker Rolls-Royce. It’s not the biggest riser or faller today – those “honours” belong to Paddy Power Betfair (+2.4%, rebounding from recent lows) and Evraz (-8.4%, disappointing Q3 production), respectively – but it captured the buzz of the trading floor this afternoon.
Late morning there were suggestions in the market of production issues that could hamper delivery of Rolls-Royce engines for the new Airbus A330neo, the company reportedly telling employees that it can only deliver 10 out of 30 engines to clients until 31 October (read my lips: no Christmas bonus)…
Before you could say “No, not the car manufacturer”, the shares began tumbling, falling from 847p (11:27am) to 747p (11:47am), a 13% fall in twenty minutes. Within moments our brokers were calling clients, highlighting the drop, offering the opportunity to benefit from any subsequent rebound.
The situation was tense until 1:16pm, when the company eventually clarified things, confirming that current financial guidance remained valid (phew!) although it admitted that production issues are real and that is now expects to deliver a total of 500 large engines to customers in 2018 instead of 550.
By that time the shares had already bounced back to 846p (1:21pm) to secure a 13% recovery. Just 2 hours of trading and a few calls, but a massive 13% share price range and a 26% round trip.
Situations like these can be a day-trader’s dream, so long as you are on the right side of the trade.
Significant 26% round trips like this one are far from common, but they can and do happen, and often at the drop of a hat. And the pay-off depends on how quickly you can assess the implications of the news, and trade or call your broker to act on your behalf.
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Artjom Hatsaturjants, Research Analyst, 26 Oct 2018
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