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How to Play Muddled Carnival Stock Amid General Uncertainty

Carnival (NYSE:CCL) stock entered 2021 riding high on hopes that the pandemic was past and the Covid-19 vaccine would support a speedy recovery. But, unfortunately, the leisure travel company’s earnings and sales haven’t rebounded as quickly as investors would have liked.

Carnival (CCL) cruise ship on water in front of beach with chairs
Source: Flickr

The result has been a volatile share price that has ultimately gone nowhere. As of Friday’s close, CCL stock was up a mere 2.3% for the year. The S&P 500, mind you, is up over 25%.

In fairness, the first half of the year was quite bullish. Had we closed out 2021 in June, then we could have chalked it up as a resounding victory for shareholders.

Sadly, the second quarter’s earnings report torpedoed Carnival stock. Additionally, we saw stocks linked to the economy reopening take a turn for the worse. The rollover in cruise lines was accompanied by airlines, travel, retail and small caps.

Given the backdrop, it’s hardly surprising that Carnival shares sank.

With that general overview, here’s a closer look at the price charts to identify which levels matter for CCL stock now.

CCL Stock’s Weekly Chart

Carnival (CCL) weekly chart with potential higher pivot low
Source: The thinkorswim® platform from TD Ameritrade
Source: The thinkorswim® platform from TD Ameritrade

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When analyzing trend structure, remember that the relationship between the last two or three pivots tells you more than anything else. The midsummer swoon created a lower pivot low. This was followed up by a failed rally that formed a lower pivot high.

The subsequent selloff is where things get interesting. Although prices fell below the 50-week and 20-week moving average, they have so far held above the old resistance pivot.

Monday’s jump on the heels of a boom in small caps can potentially create the first higher pivot low on the weekly chart in many months. It’s hard for bulls to declare victory, however, because the follow-through has been lacking. Moreover, we’re still below all major weekly moving averages. Thus, additional evidence is needed before turning bullish on the weekly time frame.

Sometimes volume patterns hint at which party holds the upper hand, but I’m finding the participation over the past month absent of any signals. We haven’t seen any significant signs of accumulation or distribution. Apathy, it seems, has ruled the roost.

One final indicator worth mentioning is the RSI. At 45, it’s fiddling in the middle and isn’t helping buyers or sellers. Based on the big picture, I’m finding it hard to have a strong directional opinion here.

Zooming in to the Daily

Carnival (CCL) stock daily chart with bear retracement
Source: The thinkorswim® platform from TD Ameritrade

The potential higher pivot low on the weekly chart appears nothing more than a bear retracement on the daily. Monday’s jump stopped short of the 20-day moving average. Had it broken above it, we could have at least made a case for the daily downtrend starting to turn higher. But it looks like we might need some time to digest overhead supply first.

It also doesn’t help that the 50-day and 200-day moving averages have turned mainly sideways. Flat trends don’t usually make for compelling directional trades.

If you must make a bet here, then high probability cash flow trades seem like the best way to go. At least then you get paid if CCL stock continues to dither.

Wait for a break above Monday’s high to confirm the daily trend is turning up. Then sell the following put.

The Trade: Sell the Dec $22.50 naked put for around $1.10.

On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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