How to Trade the Dip in Carnival, Royal Caribbean

Cruise stocks are rallying Friday thanks to an upgrade from Barclays. Here's how the charts stack up after the latest dip.
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The market has been on shaky ground this week and that goes for cruise stocks too. Through the first four days of the week, Carnival Cruise  was down 10.25%.

On Friday though, shares have been popping higher, up more than 4%.

In fact, from Thursday’s low to Friday’s high, the stock has rallied 10%. That’s a fairly solid move even for a stock that’s in a horrendous industry right now.

Cheering up investors on Friday was a note from Barclays. The analysts gave a bump across the board, raising Carnival, Royal Caribbean  (RCL) - Get Report and Norwegian  (NCLH) - Get Report to overweight ratings from equal weight.

The worst is in the past, the analysts contend. Further, even though the no-sail order will likely be extended in the short term, the industry is likely nearing a return to action.

The upgrades came after some positive tones from management referencing recent booking trends.

Despite the action on Friday though, these charts are still troubled. Can Carnival turn things around?

Trading Carnival Cruise Stock

Daily chart of Carnival Cruise stock.

Daily chart of Carnival Cruise stock.

Carnival stock doesn’t look great, but it’s been in a much worse position before. Plus, with a more leveraged balance sheet and a hampered business, who is in a rush to buy these stocks?

It’s below all of its major moving averages and struggling to hold multi-month uptrend support (blue line).

I would at least feel better about the stock if it could close above and gain momentum over the 50-day moving average and uptrend support. Ideally though Carnival can reclaim its 20-day moving average and 23.6% retracement, allowing it to potentially challenge the 200-day moving average and possibly even the June highs.

If Carnival stock is unable to reclaim the 50-day moving average and takes out this week’s low at $13.40, it puts the August low in play at $12.82. A close below that mark could put $10.80 to $11 back in play.

Trading Royal Caribbean Stock

Daily chart of Royal Caribbean stock.

Daily chart of Royal Caribbean stock.

Despite being a cruise operator, Royal Caribbean stock has looked much better. For instance, it’s holding the 50-day moving average and uptrend support. Shares are up more than 5% on Friday and looking strong vs. its peers.

Earlier this month, shares failed to push through the June highs and the 200-day moving average. If Royal Caribbean can push through the 20-day and 200-day moving averages, look for shares to challenge $75 again.

Above the 50% retracement at $76.62 could put the 61.8% retracement in play near $90.

On the downside, a rotation below the September low at $58.27 could set the stock up for a test of the $45 to $46 area.