RR.L Rollce Royce Holdings PLC - Trade Plan — 2026-05-13

TL;DR

NO-TRADE today; trigger-conditional plan armed for ~50 trading days (through H1 2026 results in July). Spot 1,191p sits in the no-edge zone of a descending channel — neither the patient-long S1 confluence at 1,133–1,168p nor the dual-trigger short level below 1,078p is engaged, and chasing the middle is the worst expression of the research view. Three contingent plans are pre-authorised: (A) patient long if price tests 1,168p with OBV intact (size 2.49% NAV, risk 0.19% NAV, TP 1,420p), (B) confirmed short if price closes below 1,078p on volume with OBV trendline break (size 2.49% NAV, risk 0.15% NAV, TP 950p), (C) breakout long if price closes above 1,330p on ≥60M volume (size 1.49% NAV, risk 0.11% NAV, TP 1,530p — only entered with the stretch target as primary, since TP1 of 1,420p alone fails the R:R hurdle). All sizes are half-vol-budget given HV30 at the 99th percentile and no accessible options market to hedge with.

Source verdict

From data/reports/RR.L/2026-05-13/research-verdict.md:

Decision. NO-TRADE — wait for either (a) limit-fill at S1 confluence 1,133-1,168p with OBV intact, or (b) confirmed dual-trigger breakdown below 1,078p with OBV trendline break. Both sides of the debate converged on this; the residual disagreement is directional bias if forced, not action at spot.

Conviction. 3 / 5.

The verdict explicitly pre-authorises three contingent expressions: patient long at S1, dual-trigger short below S4, and a permitted-but-small breakout long above 1,330p. This trade plan operationalises those three contingents. The verdict explicitly forbids chasing 1,191p, and this plan honours that.

Direction & instrument

Direction: NONE (today). Three contingent direction-and-instrument paths are armed:

The HV30-99th-pct regime combined with no accessible options chain means directional risk on this name is unhedgeable. That is a structural input to all three sizings — every contingent below uses the half-vol budget the options-flow analyst flagged ("a 1% NAV daily-vol budget implies a position roughly half what the same budget would permit under the stock's 252d HV of 34.8%").

Entry — contingent triggers

Contingent (A): PATIENT LONG at S1 confluence

• Trigger condition: Price trades into the 1,133–1,168p zone (S1 + S2 confluence: SMA200 1,167p + 1,172p HVN 412M shares + Mar-09 swing low 1,168.5p + Apr-06 swing low 1,133p + 1,133p HVN 392M shares) AND OBV holds its rising trendline (currently ~830M floor for the post-Feb-26 series) AND price prints a reversal candle on declining volume.
• Method: limit (scaled, 1/2 at 1,168p and 1/2 at 1,140p) — covers both S1 and the S1-S2 mid-zone; do not chase if price slices through without a reversal candle.
• Anchor price for sizing: 1,168p
• Validity: GTC, but re-evaluate on each Monday open until 2026-07-15 (50-day horizon).

Contingent (B): DUAL-TRIGGER SHORT below S4

• Trigger condition: Daily close below 1,078p (Mar-30 cycle low + 1,070p HVN 402M + BB lower band confluence) AND volume ≥ 50M shares (1.2x 50d average) AND OBV breaks its rising trendline in the same session. All three conditions in the same session — a price-only break with weak volume or stable OBV is a stop-run, not a thesis flip.
• Method: stop-limit order armed below 1,078p — entry on confirmed daily close, executed on the open of the following session at limit 1,060–1,070p.
• Anchor price for sizing: 1,070p
• Validity: GTC through 2026-07-15.

Contingent (C): BREAKOUT LONG above R4

• Trigger condition: Daily close above 1,330p (Apr-13/16/May-05 triple convergence — the descending channel ceiling) on volume ≥ 60M shares (≥1.5x 50d average).
• Method: stop-limit — entry on the open of the following session at limit 1,340–1,360p, allowing for a small pullback retest of the breakout level.
• Anchor price for sizing: 1,350p
• Validity: GTC through 2026-07-15.

Stop — for each contingent

(A) Patient long stop

• Price: 1,078p (structural — Mar-30 cycle low + 1,070p HVN + BB lower band)
• Type: Hard stop on daily close, NOT intraday. The Apr-28 intraday low at 1,094.8p tagged a mechanical 2xATR stop and the stock reversed +7.6% the next session — intraday stops in this vol regime are stop-runs.
• Justification: Stop distance 90p from 1,168p entry = 7.71%. ATR14 = 60.1p = 5.04% of price; 90p stop = 1.50x ATR — passes the "≥ 1.5σ of expected daily move" minimum. Snapped to S4 structural support, not arithmetic. Additional filter: stop also fires (exit at next-day open) if OBV breaks its rising trendline on any session, regardless of price — this is the OBV-filter the bull conceded in debate round 2 to address the stop-run risk.

(B) Dual-trigger short stop

• Price: 1,135p (above S2 support at 1,133p — a close back above this level invalidates the breakdown)
• Type: Hard stop on daily close.
• Justification: Stop distance 65p from 1,070p entry = 6.07% = 1.08x ATR. Tighter than the 1.5σ rule of thumb but justified because the stop is at a structural level (above the cluster that just gave way); a re-test that reclaims 1,133–1,135p is by definition a failed breakdown, not noise. Risk committee may push back on the tightness; the response is that the trigger condition itself (volume + OBV trendline break) already filters out false breakdowns, so the stop only fires on a genuine reversal of regime, not on noise.

(C) Breakout long stop

• Price: 1,249p (below the Mar-31 swing high and the SMA50 area at 1,224p; first meaningful consolidation below the channel breakout)
• Type: Hard stop on daily close.
• Justification: Stop distance 101p from 1,350p entry = 7.48% = 1.68x ATR. Passes the 1.5σ minimum. Snapped to R1 structural level, which becomes support on a successful breakout.

Targets — for each contingent

(A) Patient long

• TP1 (first target): 1,330p — the descending channel ceiling and the May-05 local high. Rationale: this is the immediate overhead supply zone; the bull's R:R argument in debate round 2 used 1,330p as the channel ceiling target. R:R from 1,168p entry: (1,330-1,168)/(1,168-1,078) = 162/90 = 1.80R. Insufficient as primary target on its own — explicitly the arithmetic the bull conceded in round 2. This is a partial-exit level (sell 1/3) not a full-exit level.
• TP2 (primary target): 1,420p — the Feb-26 52-week high. Rationale: failed-channel-target on upside breakout; consistent with the technical-analyst's secondary breakout target zone. R:R: (1,420-1,168)/90 = 252/90 = 2.80R. This is the primary R:R that justifies the trade.
• TP3 (stretch): 1,500p — beyond 52-week high, LVN zone (limited resistance above 1,420p per volume-profile method). R:R: 3.69R. Sell-side PT median 1,400p, mean 1,412p (estimate-revisions.md) — 1,500p is above consensus PT, treat as runner only.
• Trail rule: After TP1 partial (sell 1/3 at 1,330p), raise stop to entry (1,168p). After TP2 (sell 1/3 at 1,420p), raise stop to 1,330p.

(B) Dual-trigger short

• TP1: 950p — major HVN gap zone below; nearest significant accumulation zone from the 2025 base. R:R from 1,070p entry: (1,070-950)/(1,135-1,070) = 120/65 = 1.85R. The bear's primary target in debate.
• TP2 (measured-move): 818p — full channel-width projection from lower channel break (1,420p − 260p channel width = 1,160p, full-width from lower line = 818p). R:R: (1,070-818)/65 = 3.88R. Approaches 52-week low of 783p; treat as a regime-change target.
• Trail rule: After TP1 partial (cover 1/3 at 950p), lower stop to 1,070p (entry). After TP2 (cover 1/3 at 818p), lower stop to 950p.

(C) Breakout long

• TP1: 1,420p — 52-week high retest. R:R from 1,350p entry: (1,420-1,350)/(1,350-1,249) = 70/101 = 0.69R. Fails the R:R hurdle on its own. Therefore TP1 is a partial-exit (sell 1/3) signal, not a primary target.
• TP2 (primary target): 1,530p — LVN zone between 1,420 and 1,530 means limited resistance above 52-week high once 1,420 cracks. R:R: (1,530-1,350)/101 = 180/101 = 1.78R. This is the primary R:R justification for the breakout entry.
• TP3 (stretch): 1,550p — top of the LVN band; technical-analyst's stretch target.
• Trail rule: After TP1 (1,420p), raise stop to entry (1,350p). After TP2 (1,530p), raise stop to 1,420p.

Horizon

50 trading days from 2026-05-13 → through approximately 2026-07-22.

Rationale: H1 2026 IMS/results are the next binary catalyst (expected July/August 2026 per verdict; news.md flags Paris Air Show 2026 opening 2026-06-16 as a near-term catalyst inside this window). The 50-day window:

• Covers the Paris Air Show (16–22 June) — read-through to order book and sector sentiment
• Brackets the H1 print (July) — the binary that resolves the +14.14% ERM_90 revision wave (estimate-revisions.md)
• Is long enough that the S1 contingent (A) has time to fill on a normal pullback (current 90-day return -0.5%, so a 2% move to 1,168p is well inside the noise envelope)
• Is long enough that the S4 contingent (B) has time to confirm given that prior tests of 1,078p (Mar-30, Apr-29) bounced — a confirmed close below requires a regime shift, not a single down day

Catalyst calendar overlay within horizon:

If any contingent fires before 2026-07-15 and the H1 print is within the horizon of the resulting trade, the original trade plan's stop/target rules apply through the print. We do not pre-emptively close on the print — the print itself is part of the thesis-test.

Size — for each contingent

Sizing methodology. All three contingents use the half-vol-budget rule from options-flow.md: a 1% NAV daily-vol budget would normally allow ~5% NAV at HV 34.8% (252d median); at HV30 = 63.8% we halve that effective budget to compensate for the impossibility of buying convexity insurance. Conviction 3 fixes the fixed-fractional risk budget at 0.5% NAV per trade.

NAV reference: illustrative £200,000. The user's my.portfolio file lists positions (CCC3.F, DTE.DE, DHL.DE, EOAN.DE, MBLV) but does not explicitly state NAV. £200,000 is used as a research-mode reference number for sizing math; actual share counts scale linearly with the user's actual NAV (e.g. if real NAV is £100k, halve all share counts; if £400k, double). Risk committee should reconcile against actual NAV before any contingent fires.

For all three: the minimum-of-methods rule binds at vol-targeted (half-budget) in every case — fixed-fractional would size too large at this volatility regime, and Kelly is either over the single-position cap (A, B) or negative on the primary R:R (C).

Sizing (A) Patient long at 1,168p

sizing_A:
  method_used: vol_targeted_half_budget
  size_pct: 2.49
  shares: 426
  notional_gbp: 4975
  risk_gbp: 383
  risk_pct_nav: 0.19
  conviction: 3
  rationale: >
    Half-vol budget binds at 2.49% NAV. Fixed-fractional (0.5% NAV / 90p
    stop) would have suggested 6.49%; quarter-Kelly at p=0.55, r=2.80
    would have suggested 9.7% (above the 10% single-position cap). Took
    the minimum — vol-targeted — because EXTREME-regime sizing is the
    operative constraint here, not the stop distance.
  alternatives:
    fixed_fractional_pct: 6.49
    vol_targeted_full_budget_pct: 4.98
    vol_targeted_half_budget_pct: 2.49
    kelly_quarter_pct: 9.72
  caps_checked:
    single_position: 10.0      # 2.49 OK
    single_loss: 1.0           # 0.19 OK
    sector: 35.0               # n/a — no current aerospace exposure in user portfolio
    correlation: 25.0          # n/a
    liquidity_days: 1.0        # 426 shares vs ~41M ADV → trivially OK

Sizing (B) Dual-trigger short at 1,070p

sizing_B:
  method_used: vol_targeted_half_budget
  size_pct: 2.49
  shares: 465
  notional_gbp: 4976
  risk_gbp: 302
  risk_pct_nav: 0.15
  conviction: 3
  rationale: >
    Half-vol budget binds at 2.49% NAV. Fixed-fractional (0.5% NAV / 65p
    stop) would have suggested 8.23%; quarter-Kelly at p=0.55, r=1.85
    would have suggested 7.7%. Took vol-targeted minimum.
    BORROW CHECK REQUIRED before sizing fires: RR.L is FTSE 100 deep
    borrow expected, but rate/utilisation unverified by trader. If borrow
    rate > 200bps or utilisation > 80%, halve the size again. If
    unborrowable, downgrade contingent (B) to NO-TRADE — no put structure
    available as fallback.
  alternatives:
    fixed_fractional_pct: 8.23
    vol_targeted_full_budget_pct: 4.98
    vol_targeted_half_budget_pct: 2.49
    kelly_quarter_pct: 7.68
  caps_checked:
    single_position: 10.0      # 2.49 OK
    single_loss: 1.0           # 0.15 OK
    sector: 35.0               # n/a
    correlation: 25.0          # n/a
    liquidity_days: 1.0        # 465 shares vs ~41M ADV → trivially OK
    borrow_available: UNVERIFIED  # risk committee challenge point

Sizing (C) Breakout long at 1,350p

sizing_C:
  method_used: vol_targeted_half_budget_with_breakout_haircut
  size_pct: 1.49
  shares: 221
  notional_gbp: 2984
  risk_gbp: 223
  risk_pct_nav: 0.11
  conviction: 3
  rationale: >
    Half-vol budget with a 0.6x breakout-haircut binds at 1.49% NAV.
    Breakout entries in HV30-99th-pct regimes have lower base-rate
    success than mean-reversion entries, and the verdict explicitly
    flagged breakout-long as "permitted small" — smaller than the
    patient-long budget. Fixed-fractional would have suggested 6.68%;
    quarter-Kelly is NEGATIVE for TP1=1,420p (R:R 0.69 below break-even
    win-rate threshold). Trade only enters if the trader is willing to
    hold for TP2=1,530p (R:R 1.78, quarter-Kelly +7.5%) as the primary
    exit.
  alternatives:
    fixed_fractional_pct: 6.68
    vol_targeted_full_budget_pct: 4.98
    vol_targeted_half_budget_pct: 2.49
    vol_targeted_half_budget_breakout_haircut_pct: 1.49
    kelly_quarter_TP1_pct: -3.62  # NEGATIVE: do not size on TP1 alone
    kelly_quarter_TP2_pct: 7.45
  caps_checked:
    single_position: 10.0      # 1.49 OK
    single_loss: 1.0           # 0.11 OK
    sector: 35.0               # n/a
    correlation: 25.0          # n/a
    liquidity_days: 1.0        # 221 shares vs ~41M ADV → trivially OK

Sizing (today, while waiting)

sizing_today:
  method_used: none
  size_pct: 0.0
  size_dollars: 0.0
  risk_pct_nav: 0.0
  conviction: 3
  rationale: >
    Verdict is NO-TRADE at spot 1,191p. Three contingent plans are armed
    above. No position taken today.

Critical assumptions

These become the journal's key_assumptions and the risk committee's challenge points:

1. NAV reference is illustrative. £200,000 is used as a research-mode reference; actual share counts scale linearly with the user's real NAV. The risk committee must reconcile against actual NAV before any contingent fires.
2. No options market is structurally available. All three contingents are equity-only. If a chain becomes accessible (Tradier, IBKR, or premium provider keyed in .env), re-run options-flow analysis and re-plan structures — particularly (B) where a bear call spread on RYCEY would dominate a short equity position given borrow risk.
3. Borrow availability for (B) is unverified. FTSE 100 large-cap suggests deep borrow but rate/utilisation must be checked at the broker before the short fires. Risk committee should treat this as the primary challenge point on (B).
4. OBV trendline is held as the no-stop-run filter. All three contingents use OBV as a secondary signal: (A)'s entry requires OBV holding the rising trendline; (B)'s entry requires OBV breaking it. If OBV behaviour changes structurally (e.g. flattens but neither breaks nor holds), the binary triggers don't fire and the plan defaults to NO-TRADE through the horizon.
5. HV30 stays elevated. Sizing uses half-vol budget because HV30 is 99th-percentile (63.8%). If HV30 drops below 40% before a contingent fires, double the contingent sizes back to full-vol-budget (4.98% NAV on A and B, 2.98% NAV on C) — but only with risk-committee re-approval.
6. The fundamental thesis is undisputed. Revenue growth 16.2% CAGR, EBIT margin 5.8%→20.8%, FCF £928m→£3,580m, net cash £1.8bn, 19 analysts zero Sells, ERM_90 +14.14% on FY2026 (sources: fundamentals.md, estimate-revisions.md). This underwrites the long contingents (A) and (C); contingent (B) is a tape-driven trade against an unsupportive macro factor channel, not against the fundamentals.
7. The macro headwind (HYG beta 3.11, Brent beta -0.189, ITA beta 0.813) is currently active. Per macro-factor.md, the regime is REFLATION_RISK_OFF with verdict HEADWIND, conviction 4. The patient-long thesis (A) requires this headwind to either (i) abate before fill or (ii) be priced into the 1,133–1,168p entry zone — otherwise (A) fills but bleeds. The short thesis (B) is consistent with this regime continuing.

Thesis-invalidating events

Events that, if they occur, exit any open contingent immediately at next open, regardless of price level:

• Fatal Trent XWB safety event or grounding — any flying-hour suspension on the A350 platform. Mechanical-failure narrative would override every other factor.
• Buyback suspension or material reduction — any communication from RR.L management that the £9bn buyback is being paused, delayed, or reduced. News.md flags the buyback-plus-bond-issuance combination as a yellow flag; a buyback suspension would convert that to a red flag.
• Sudden management departure — Tufan Erginbilgic departing for any reason within the horizon. The turnaround thesis is explicitly CEO-linked per fundamentals.md.
• Major contract loss — loss of any single Power-by-the-Hour contract > 5% of civil aerospace revenue, or a SMR programme cancellation by a contracted utility.
• H1 print materially below ERM-implied FY2026 EPS of 37.68p — verdict's invalidation trigger; revision wave breaks → re-debate before any further sizing on (A) or (C).
• Brent crude sustained above $115 for 10+ trading days within horizon — verdict's tilt-bearish trigger; activates the airline-demand-destruction overlay on PBH revenue. Exit (A) or (C) if open; hold (B) if open.
• HYG widens through its 21-day low on rising volume AND closes below YTD low — primary macro-factor channel against the name; exit (A) or (C); reinforces (B).
• Counter-trade in another aerospace name reaches stop or invalidation — if MTX.DE (open HOLD) or RHM.DE (open HOLD) prints H1 results that invalidate their respective theses, treat as sector-wide signal and pause new RR.L entries pending re-debate.

Trigger-watch list

The specific price/volume/OBV conditions that flip this plan from NO-TRADE to actionable:

Daily check protocol. This trade plan is a standing armed plan, not a one-shot decision. Each trading day until 2026-07-22, the user (or the orchestrator) should check:

1. Did price touch 1,168p or 1,078p or 1,330p? (price triggers)
2. Did volume exceed 50M (for S4 break) or 60M (for R4 break)? (volume confirmation)
3. Did OBV behave as required? (signal filter)
4. Did any thesis-invalidating event happen? (kill-switch)
5. Has the horizon expired? (default-to-roll: re-debate, do not auto-extend)

What I'm explicitly not doing

• Not buying at 1,191p. This is the verdict's explicit prohibition; the half-vol-budget math doesn't save a 1.0R-or-worse R:R against 1,330p resistance with a structural stop at 1,078p.
• Not buying long options to express the long view. HV30 99th percentile + no accessible chain = even if a chain existed, options would be priced for vol-crush risk that outweighs the directional view. Equity-only.
• Not shorting absorbed support. Shorting at 1,191p against a rising-OBV cluster of 391–527M shares at 1,121–1,172p would be the wrong asymmetry — that's why the bull's complicating evidence held in debate.
• Not pre-positioning for the H1 print. The bull's "load up before July" framing was the marginal case the verdict explicitly declined to take. If S1 fills before the print, we're in via (A); if not, we wait for the print to remove the binary and re-debate.
• Not assuming today's macro headwind reverses. Sizing assumes EXTREME-vol regime persists and HYG/Brent stay bearish. If those abate, we re-size up — we don't pre-size against an assumption that hasn't happened.
• Not sizing all three contingents simultaneously. They are mutually exclusive triggers — only one can fire (the one whose level is reached first). Total NAV-at-risk across the armed-but-untriggered plan is 0%.

What would change my mind

End of trade plan. Risk committee (three voices) takes this as input next.