New Price Target for Carnival, Other Cruise Stocks as Bullish Setups Flash
A fleet of attractive technical patterns have emerged in cruise line names. Here's how to play the group.
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Chart technicians love a good cup-and-handle pattern. That pattern was originated by William O’Neil, who defined the formation as a bullish continuation pattern.
What can we say about a group of stocks when many of its names are forming similarly bullish patterns? I’m referring to cruise lines, those hotel-sized ships that sail to your favorite vacation destination.
Right now, that corner of the market has enough cups and handles to fill a cupboard.
Pockets of Strength
Our recent coverage of the hotel sector also revealed a strong bullish bias. It seems that hospitality and travel in general are doing well, and that's a good sign for the economy going forward.
Let’s chart a course through the cruise lines, starting with the most well-known name in this group.
Carnival Corporation
Miami-based Carnival Corp. (CCL) is the world’s largest cruise operator, carrying millions of guests every year. In addition to Carnival, the corporation operates Holland America Line, Princess Cruises, and a handful of other brands.
As of Friday’s close, Carnival traded just 2% below its all-time intraday high of $32.73 (black horizontal line). If Carnival can close above that level, the stock will sail to a five-year high.
Over the past three months, the stock has formed a cup-and-handle pattern (shaded yellow). That pattern projects a new price target of $40 for Carnival.
Norwegian Cruise Line Holdings
Like Carnival, Norwegian Cruise Line Holdings (NCLH) has formed a cup-andhandle pattern (shaded yellow). This formation suggests a new target price of $31 for the Miami-based company.
Technically, the main difference between Carnival and Norwegian is the location of their respective cup-and-handle patterns.
While Carnival’s is within shouting distance of a fresh multi-year high, a breakout from Norwegian’s cup and handle merely puts it at a three-month high. Not bad, just not as significant.
Royal Caribbean Cruises Ltd.
Royal Caribbean Cruises (RCL) also has formed a cup and handle (shaded yellow). The pattern projects the stock to the $360 area.
What I really like about this chart is that RCL has already broken out from its cup and handle. This demonstrates short-term relative strength compared to Carnival and Norwegian.
Bottom Line
If a short-term play is your preference, I’d look to Royal Caribbean. For a longer-term investment, consider Carnival. My preference is to buy all three as a basket, as the entire group appears ready to set sail.
At the time of publication, Ponsi was long CCL, RCL, NCLH.
