Bottom fishermen have rounded up the cars on the cruise ship inventories and are picking up shares at a rapid pace, speculating that the industry will bounce back later this year and until 2021. Health advance bookings are at the basis of this buying pressure, suggesting that the Americans are going to go back to their old travel habits as soon as possible. If the value is true, the positions taken at these depressed levels could pay off handsomely in the coming quarters.
However, there is no guarantee that these businesses will survive, because the secondary offerings and/or new loans are in difficulty to match the high cash burn rate, increasing the threat of bankruptcy in the fourth quarter and beyond. Cruise ship operators are currently targeting the second half of the third quarter, for the resumption of operations, but it is equally dangerous because it will take only one outbreak and quarantine to trigger a new wave of cancellations.
The COVID-19 infection rates is fleeting as the Northern Hemisphere, the head in the hot months of the summer, but the seasonal viruses of the impact is more and more clear by the day, with a high probability, for a second wave when the temperature drops in September and October. None of these companies do not have the money required to survive in the spring of 2021 without at least a limited income, raises doubts as to the wisdom of the purchase of these stocks right now.
The area of the accumulation of readings have also shot higher since the month of March, with several components, the return to pre-crisis levels, but secondary offerings are responsible for part of the increase, with new shares of the fill of the portfolios. This dilution will undermine the potential for gains in the coming quarters due to the increase in float and outstanding shares each share is worth less than it was at the same price a few months ago, making it more difficult for upticks to mount attack levels.
Carnival Corporation & Plc (CCL) overcome well before the current crisis, the display of an all-time high of $72.70 in February 2018 and entering a decline that has carved a lower high in February 2020, just in front of a near-death spiral of dumping the stock for a 17-year low in the single digits. The sell-off broke support at the 1999, 2001 and 2009 lows, the establishment of new resistance mid-to upper teens. The subsequent bounce topped out at $17.07, a week later, without increase in the last two months.
The monthly stochastic oscillator is trying to cross a buy cycle while the daily on-balance volume (OBV), the accumulation-distribution indicator has climbed to an all-time high, just weeks after the company issued 62.5 million share secondary offering. On the whole, this price action looks like a triangle holding pattern with a strong resistance, while market players wait to see if the company can resume operations this summer.
Royal Caribbean Cruises Ltd. (CRE)has recorded a record high of $135.65 in February 2018 and relaxed in a trading range with support in the upper $80. In January 2020 breakout attempt has failed within a time limit of 60 cents to the state of the high, which gives a vertical decline that dropped the stock to an eight-year low in the upper part of adolescence, 18 March. The subsequent rebound also topped after a week, with a resistance of close to$ 50, generating two setbacks in the last two months.
The stock is hovering just under the March high, which was closely aligned with the 50 days EMA resistance. Unlike Carnival, Royal Caribbean has broken a single long-term support level, to 2016 low in the middle of$60. OBV has also risen to an all-time high, but the company has not issued a secondary offering, up to the present, instead of relying on higher debt levels. Another rally leg should be achievable with these entries, may be reaching the breaking strength of 2016 low.
The Bottom Line
Bottom fishermen are loading up on cruise ship stocks, betting on a rebound later this year and in 2021.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.