With a resurgence of travel demand driving strong earnings and analyst upgrades, the cruise line industry appears to be entering a new bullish regime. While charts like Carnival Corp. (CCL) have once again become overbought, the strength of the recent breakout suggests they may just be getting started. Starting with the weekly chart, we can see that over the last 18 months, Carnival had found consistent resistance around $19.50. Through the course of 2024, numerous tests of this price resistance led to a pullback down to around $14, as the stock settled into a fairly consistent price range. The longer a resistance level is tested, the more meaningful it becomes when the price finally breaks above this price ceiling. Or as legendary technical analyst Alan Shaw used to say, “The broader the base, the higher in space.” Given the strength of the breakout, combined with the fact that momentum indicators do not signal an overextended situation, we could see a retest of the 2021 high in the low 30’s. On the daily chart, we can see the broad base in much more detail, as well as the significance of the breakout above the $19.50 level earlier this month. Given that broken resistance levels often become support, we would expect $19.50 to be a decent “line in the sand” to watch on pullbacks. As long as CCL remains above this breakout level, the uptrend phase appears to be in good shape. Note the daily RSI which has pushed above the crucial 70 level on the recent breakout. This usually indicates two things: the overall trend is positive, as stocks usually only become overbought during bull phases; and we may be due for a brief pullback, similar to what we observed in mid-September. One way to guard against a painful pullback in this situation is to use a trailing stop indicator like the Chandelier Exit system. Popularized by Alexander Elder, this indicator is based on average true range (ATR) and provides a dynamic stop based on the volatility of the price action. Note how the pullbacks in early September and early October found support at the purple chandelier exit line on the way up from the August low? As long as the Chandelier Exit line holds, the indicator suggests that the uptrend is still strong. The recent breakout for cruise lines like Carnival Corp. suggests that the uptrend phase may just be beginning. By using a sound technical analysis approach, savvy investors can benefit from uptrends and also minimize downside risk once the uptrend is exhausted. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
