The major averages are seeing their share of fireworks Monday, but don’t include shares of Royal Caribbean (NYSE:RCL) in those festivities. Let’s take a look at what’s happening off and on the price chart of RCL and whether a buy decision makes sense in today’s stock market.
Following the Fourth of July holiday, investors have gotten in the spirit of buying risk assets. The broad-based, large-cap S&P 500 is up 1.35% and hitting its best levels in nearly a month. At the same time, the tech-heavy Nasdaq Composite is up 1.9% while notching record highs.
U.S. investors can credit today’s celebration to interdependence rather than independence. Gains in stateside benchmarks are riding the coattails of surging Chinese markets following a front-page editorial in the state-owned China Securities Journal which stressed a “healthy bull market” is important.
But while shares of companies like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) are participating in a big way, Royal Caribbean’s fractional drift of around 0.1% is a reminder the market is still one made up of stocks — and one sometimes preoccupied with other matters.
A continued spike in Covid-19 cases led by Florida’s nearly 200,000 infected appears to weighing on Royal Caribbean shares. It could be worse. Peer Carnival (NYSE:CCL) and airline stock Southwest Airlines (NYSE:LUV) are both already underwater Monday and in sharp contrast to the market.
It’s fair to say some investors are likely worried Royal Caribbean’s current resumption of cruise operations, scheduled for Sept. 16, could be at risk of being extended again. Longer-term though, today’s fears doesn’t imply investors should give up entirely on RCL stock either.
Following May’s key $3.3 billion capital raise and capital lines for additional funding if needed, the fact remains Royal Caribbean can stay afloat well into 2021 even if operations remain at a standstill. And just like the buffet which so many cruisers love, Royal Caribbean shares will, one day, offer a smorgasbord for investors to sink their teeth into.
RCL Stock Monthly Stock Chart
Source: Charts by TradingView
Several weeks ago at InvestorPlace I wrote an article discussing a bullish forecast for Royal Caribbean. Following an earnings release, shares looked technically very promising. As well, a couple call spreads to capitalize on the situation were proposed. It turned out the timing couldn’t have been any better. Both verticals surged in value to capture the bulk of their maximum payouts in just a matter of days.
Today, we’re smartly taking a step back, despite the idea of longer-term survivorship. Currently and as reflected by the provided monthly chart, there are signs of pending trouble for RCL investors. After Royal Caribbean rocketed higher into early June, a much needed short-term pause has ominously matured into a bearish candlestick topping pattern. It’s a shooting star formation and Royal Caribbean shares are nearing a bearish challenge.
Coupled with this more cautious framework, stochastics never moved out of an oversold condition despite a 300% rally which also took roughly 2.5 months to complete. It’s odd. The good news is the indicator is aligned bullishly. But for now the unusual weakness is enough to remain defensive and on the sidelines.
To be fair, lesser time frames aren’t necessarily warning of bearish downside. If investors were to queue up a weekly chart of Royal Caribbean, it would take very little, in the scheme of things, for shares to confirm a pullback low within an uptrend. Bottom line though, as cruise lines are now even further removed from being deemed an essential service, questionable conditions off and on the price chart merit suspicion about Royal Caribbean shares.
Investment accounts under Christopher Tyler’s management do not own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.