Hurricane Irma is wreaking havoc in the Caribbean Thursday, causing loss of life and destruction as the category 5 hurricane makes its way toward the Florida coast.
Naturally, a storm this destructive is having an impact on the financial markets; notably, shares of cruise ship operators dropped days ago, when weather simulations put Irma's path through the heart of the Caribbean. The Caribbean accounts for more than a third of cruise lines' total ocean-going capacity, according to Bloomberg. The best-case scenario is that Irma causes a major disruption to scheduled cruise operations this week.
And the scenarios get a lot worse from there.
More troubling, Hurricane Irma isn't alone. There are currently three active hurricanes in the Atlantic basin, the first time we've seen such a concentration of storms since 2010.
So, after charging higher all year long, investors are worrying that cruise-ship stocks could capsize. It's a reasonable concern, but it's not warranted -- at least, not yet. Cruise stocks are looking more buyable than ever, after this week's Irma-induced dip. To figure out how to trade the stocks, we're turning to the charts for a technical look:
Up first is the biggest cruise operator in the world, Carnival Corp. (CCL) . Carnival's upside action has been hard to miss lately. Shares are up nearly 30% year-to-date, bouncing their way higher in a very well-defined uptrend since the beginning of the year. The good news for Carnival investors is that this stock's technical trajectory isn't changing in September.
Carnival's uptrend is formed by a pair of parallel trend lines that have identified the high-probability range for shares to remain stuck within -- every test of the bottom of that trend channel has provided a low-risk, high-reward buying opportunity for shares year-to-date. And it looks like we're touching another buying opportunity this week.
Carnival isn't alone. Royal Caribbean Cruises (RCL) is showing investors almost the exact same chart right now:
Like with Carnival, the Irma-fuelled selling earlier this week brought Royal Caribbean down to its trendline support level. But, critically, shares are holding at that support level. That's also the case now with "big three" cruise operator Norwegian Cruise Lines (NCLH) .
In any of these three cases, risk-management remains very important. While all three major cruise operators are holding onto their uptrends despite weather pressures this September, the fact remains that price setups can change as new information gets released to the market. From a risk-management standpoint, it makes sense to sell if any of these three stocks materially violates its uptrend support level. Investors should tolerate temporary blips below support, especially now, but a meaningful penetration of those trendlines indicates that the uptrends are over.
That clearly hasn't happened yet.
Instead, the buy signal comes on the next meaningful bounce higher. That's the confirmation that buyers remain in control of cruise stocks this month.
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