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Is Royal Caribbean Finally a Buy?

Royal Caribbean is rallying nicely on earnings. Can it make it to $100 now?

Royal Caribbean  (RCL) - Get Royal Caribbean Group Report has been trading incredibly well lately, up more than 10% on Monday and working on notching its fifth straight daily gain.

If shares closed right where they are now, this five-day rally would have generated a return of almost 29%.

Earnings are helping to drive the gains on Monday

The cruise industry has been ravaged by the coronavirus, with business essentially shuttered for months now. But investors know there is pent-up demand for cruisers just waiting to get back on the water.

Even though revenue was down an astounding 99% year over year - you don’t see that too often - the company’s bottom-line results beat expectations.

However, it’s not about what a company has done, it’s about what it will do moving forward. With vaccines in play and the economy continuing to open up, investors are laying their money on cruise stocks.

While Royal Caribbean is leading the charge, Norwegian Cruise Line  (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report was up almost 10% and Carnival Cruise  (CCL) - Get Carnival Corporation Report gained more than 8%.

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Trading Royal Caribbean

Daily chart of Royal Caribbean stock.

Daily chart of Royal Caribbean stock.

Royal Caribbean stock is hitting its highest level since February 2020, as shares are currently clearing that double-top pattern from December near $85.

Twice the stock found this mark to be resistance before fading lower back into the $60s. Now investors want to see this current rally stick. Giving up the gains wouldn’t be the end of the world, but it would be a blow to the bull case.

If it does give up some of these gains, look for support from the 50% retracement near $77.50, as well as the 10-day moving average. Below both could put $70 or lower back on the table.

While optimism is rising, let’s remember we are looking at a company that’s generating only 1% of the sales it did a year ago. So in that respect, more downside could be possible, particularly if we get a market-wide correction.

On the upside, I really want to see Royal Caribbean stock hold up over $85. Above it will keep the 61.8% retracement on the table near $91.

Should shares clear this mark, it puts $100 and the February gap near $105 on the table. A surge to $100 would be a big confidence booster for the bulls and likely result in some short-term profit taking should it happen.

Above this zone and the 78.6% retracement is possible, near $110.