If you hadn’t heard, passengers are now boarding Carnival (NYSE:CCL). But cruises are one thing, right? The question for investors is whether the time is right to purchase shares? To figure that out let’s dive into what’s happening off and on the Carnival stock chart, then offer a risk-adjusted insurance policy to guard against sinking your investment account.
It’s been a long time coming for many travelers. But earlier this month and more than six months since the novel coronavirus first hit the shores of the U.S., cruise line operator Carnival announced it would tiptoe back into the high seas beginning with a single route embarking out of Italy.
Bon voyage? Given the pandemic is still rightfully front-page news, as well as the stigma attached to cruise lines caught publicly in Covid-19’s crosshairs early on, it might be reasonable to assume re-growing Carnival’s brand and operations will be an uphill battle. It’s a concern also playing out in real time. A European cruise operator has just confirmed 12 crew members have tested positive for the coronavirus. Still, that cautious belief could still prove very wrong.
Signs of Potential Carnival Stock Moves
As InvestorPlace’s Chris Markoch noted earlier this month, demand exists. It turns out all those seniors, families, newlywed couples and others making up the cruise line industry’s bread-and-butter demographic — they’re not shying away. One culinary-focused cruise line just saw record-setting bookings for 2021, with nearly half of the new reservations coming from first-time guests.
To be fair, advanced bookings aren’t actual revenue for Carnival. Potential customer promises are prone to cancellation or being pushed out. But to ignore the early signs reflective of man’s eternal ability to forgive and forget could be a huge mistake for today’s investors.
Monthly CCL Stock Chart
Source: Charts by TradingView
The ability to move past difficult challenges and circumstances has served humankind very well historically. And despite the tragedy of Covid-19, there’s little to believe this time will be different. The real tragic part for CCL investors will be if the stock fails to yield a different outcome.
As an investment, history has not been kind to the company’s longer-term shareholders. On a dividend-adjusted basis today’s investors can buy shares at 1997 levels. To say the least, Carnival is no Tesla (NASDAQ:TSLA), let alone a Disney (NYSE:DIS) or Costco (NASDAQ:COST) for that matter.
The upside is a stock’s track record isn’t conclusive proof of what will play out in the future. Sure, there are a few multi-generational winners where every dip seemingly proves a profitable opportunity. But those are far and few in-between. The reality is most investments are more challenging and quite often for long periods. And right now there are indications a very lengthy bearish cycle in Carnival could be near finishing.
The extended monthly view of Carnival stock shows an undercut test of a key low dating all the way back into the late 1990’s. Today, CCL’s stochastics indicator is bullishly aligned in oversold territory and shares have established five months of successfully holding above lateral support. It’s promising. In our view, though, it’s not yet actionable either.
What I’d like to see from Carnival’s price chart is for the stock to trade above the candlestick bodies of the past six months before buying shares. As the horizontal line shows, that’s near $18. Further, a purchase is conditional on stochastics coming up for air out of oversold territory. I’m uninterested in buying a ship or a stock in this case, that’s still sinking. And should investors see that kind of help from the price chart, I’d suggest a travel insurance policy of sorts and point investors towards a fully hedged stock collar position, just in case history continues to repeat itself.
On the date of publication, Chris Tyler did not hold, directly or indirectly, positions in any of the 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.