Carnival Corporation (NYSE:CCL) and Royal Caribbean Cruises, Ltd (NYSE:RCL) reached new 52-week lows on Thursday after plunging 13% and 10%, respectively on Wednesday in response to a series of analysts weighing in on the stocks.
Morgan Stanley analyst Jamie Rollo maintained Underweight on Carnival and lowered the price target from $13 to $7. Barclays analyst Brandt Montour initiated coverage on the stock with an Overweight rating and announced a price target of $14.
Montour also weighed in on Royal Caribbean, initiating coverage with an Overweight rating and announcing a $56 price target.
Montour’s new price targets for Carnival and Royal Caribbean suggest about a 60% increase, each, from the stocks’ current share price.
Despite their most recent plunge, Carnival and Royal Caribbean both look set to bounce higher over the coming days, due to bullish signals that have appeared on their daily charts. Carnival appears slightly stronger than Royal Caribbean due to the steep level of bullish divergence that developed on its chart.
It should be noted that events affecting the general markets, negative or positive reactions to earnings prints and news headlines, can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.
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The Carnival Chart: Carnival fell to a level on Thursday that the stock hasn’t traded at since April 3, 2020.
Despite the steep drop, Carnival’s relative strength index (RSI) has been making a series of higher lows since June 16, which indicates bullish momentum is increasing. In order for the bullish divergence to correct, the stock will either need to trade significantly higher in the near future or plummet low enough to drop the RSI back into oversold territory.
Carnival looks to be printing a long-legged doji or hammer candlestick, which could indicate higher prices are in the cards for Friday. The stock is trading in a confirmed downtrend and any bounce is likely to form another lower high.
Carnival has resistance above at $9.16 and $10 and support below at $8.53 and $7.80.
Also like Carnival, Royal Caribbean was working to print a long-legged doji or hammer candlestick on Thursday, which suggests higher prices are in the cards for Friday.
Royal Caribbean has resistance above at $40.35 and $47.42 and support below at $33.50 and $25.60.
