Carnival Corporation & Plc (CCL) report of the second quarter of 2020 earnings, Wednesday’s pre-market, with Wall Street analysts expecting a loss of $1.76 per share on $737.8 million in sales. The stock charged higher after the cruise ship missed estimates by a wide margin in March, at the end of a fierce decline, which has declined nearly 85% of its value in two months. The company has suspended guidance, at the time, informing him that he could not provide a second quarter or a fiscal year forecast because of COVID-19, which has forced the cruise line, closures all across the globe.
Refinancing and secondary offering, have kept the devil from Carnival of the door, the extension of its ability to withstand the loss of income in its fourth quarter. The company has recorded a significant improvement in bookings since March, but generous cancellation policies increase the risk that customers will demand repayment if the current infection recovery marks the beginning of a terrible “second wave.” The company is unlikely to obtain additional funding, if that occurs, the higher the odds of bankruptcy.
The stock displayed a three-month last week and I went with wide reference points, giving a maximum of eight points in three sessions. For the moment, at least, the recovery of the wave has failed to reach the 200-day exponential moving average (EMA), which has been broken on heavy volume in January. The decline has reached the 50-day EMA in the mid-teens, which was taken in May. Buying interest and short covering have increased during the quarter, the lifting of the accumulation of readings to all the vertices.
CDC’s Long-Term Chart (1990 – 2020)
The stock of arrow higher in the 1990s, with a growth sustained by the fall of communism and the opening of new tourist places. It is divided in two times during a spectacular ascent of the single figure in the low $50, the trim in the second quarter of 1999. The price action completed a head and shoulders breakdown in February 2000, generating a vertical decline that found support in the upper part of the adolescence in the second quarter.
Successful tests in 2001 and 2003 and has completed a triple bottom reversal, before renewed upside in the mid-decade bull market. The rally finally ended with a return trip in 1999, in 2004, the outbreak of 2005, advance toward the upper part of $50, followed by a failure of the escape and the downward trend that has accelerated during the economic collapse of 2008. The selling pressure below the low recorded at the beginning of the decade, before finishing in 11 years in November.
A choppy two-legged recovery wave complete 100% retracement in 2005 high in the first quarter of 2017, which gives an immediate escape, which posted a record high of $72.70 in January 2018. Trade war fears of the undermine buying interest, contributing to a constant of the slide, which initially completed in 2016, the support in October 2019. The stock ticked higher by the end of the year, reversing just above $50 and a pullback in February, when the bottom dropped out.
The fall has broken the 200 month EMA, establishing a strong resistance near$ 40, and then cut the, from 2001 to 2003, triple bottom before landing on a 27-year low in the single digits. The stock has bounced back above broken support in the last three months, but the trading dangerously close to the contested level, increasing the chances of the resumption of the bearish trend. In addition, the monthly amount of the stochastic oscillator has refused to co-operate with the bulls, failing to seize a strong buy of the cycle.
CCL Short-Term Chart (2018 – 2020)
The balance volume (OBV), the accumulation-distribution indicator has fallen to multi-decade low during the first quarter of decline, and turned sharply more, the zoom at a record level in April. It has added to the upside since that time, resulting in a bullish divergence with the price collapse. However, OBV could be faulty, in this case, because of a $ 1.25 billion public offering, and historical short-covering by bears taken at the bottom of the drop.
The short-term increase of the inverse .386 retracement level of Fibonacci from the last week, highlighting the strength in the middle of$20. It has not yet completed the March 9, gap or reaches the 200-day EMA, which is in decline thanks to the .50 retracement. In turn, this suggests that the stock will be difficult for the mounting of the upper part $20, while the downside risk has increased, raising the odds for a crucial test of the March lows. A break of this level could be catastrophic, setting the stage for the potential of bankruptcy.
The Bottom Line
Carnival reports earnings this week, with low expectations, increasing the chances for a buy-the-news reaction. However, the long-term outlook remains strongly bearish, with the possibility for the company’s crushing losses in revenue.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.