TUI Travel shares hit psychological resistance after strong earnings

Shares in TUI Travel rose 3.3% on market open as shareholders cheered the travel firm’s results. Shares quickly fell back, however, to trade 0.6% lower as prices neared psychological resistance of 400p.

Just like when the price of goods appear expensive at £10.00 but cheap at £9.99, the same happens in the financial markets and we saw many investors place sell orders around the 400p level, which triggered a sharp fall in shares after the initial price surge (see chart below).

Solid set of earnings

Nevertheless, this should not distract from what has been another solid set of results from the travel firm. TUI Travel posted a 13% rise in full-year profits to £555mn for the year to the end of September whilst revenues grew by 4%. This was higher than the 11% forecast by the firm in September, a forecast that they had already upgraded at the time, and so this result is very strong and helps to cement investor confidence in the company.

The final dividend was increased to 9.75p, a rise of 17%.

This result continues the very positive tone set for travel firms of late, with rival Thomas Cook also beating forecasts late last month when it reported a 49% jump in earnings, seeing its share price hit a new three-year  high.

A minor price correction?

Both TUI Travel and Thomas Cook have seen their respective share prices turbo charge higher in the last 18 months and today’s results will do little to detract from the good feeling surrounding both firms at present. That said, both stocks are due a minor correction whereby investors look to lock in their gains. The approaching end of the calendar year may well see investors re-shape their portfolios as part of this.

That said, given the strong sentiment, any price weakness has been seen as buying opportunities and so a minor correction in both stocks will likely be healthy for long term upward price momentum.