The cruise industry appears to be entering a new bullish mood as a resurgence in travel demand drives strong profits and analyst upgrades. While charts like Carnival Corporation (CCL) are once again overbought, the strength of recent breakouts suggests they may just be getting started. Starting with the weekly chart, we can see that Carnival has found consistent resistance near $19.50 over the past 18 months. Throughout 2024, multiple tests of this price resistance resulted in a pullback back to around $14, as the stock settled within a fairly consistent price range. The longer the resistance level is tested, the more meaningful it will be when the price eventually breaks through that price ceiling. Or as legendary technical analyst Alan Shaw once said, “The wider the base, the higher the headroom.” Given the strength of the breakout, and the fact that the momentum indicator isn’t signaling an overextended scenario, we might be looking at A retest of the 2021 highs below $30. On the daily chart, we can see the broad fundamentals in more detail and the importance of a break above the $19.50 level earlier this month. Given that broken resistance often becomes support, we expect $19.50 to be a retracement level worth watching. As long as CCL remains above this breakout level, the uptrend phase appears to be in good shape. Note that the daily RSI has moved above the key 70 level on its recent breakout. This usually means two things: the overall trend is positive, as stocks typically only become overbought during bull market phases; and we could be in for a brief pullback, similar to what we observed in mid-September. In this case, one way to prevent a painful retracement is to use a trailing stop indicator such as the Chandelier Exit System. Popularized by Alexander Elder, this indicator is based on the average true range (ATR) and provides dynamic stops based on the volatility of price action. Notice how the pullback in early September and early October found support at the Purple Chandelier exit line on the way up from the August lows? As long as the Chandelier exit line remains unchanged, this indicator indicates that the uptrend remains strong. Recent breakouts from cruise lines like Carnival Corporation suggest that the uptrend phase may just be beginning. By using sound technical analysis methods, savvy investors can benefit from uptrends and minimize downside risks once the uptrend has exhausted itself. -David Keller, CMT marketmisbehavior.com Disclosure: (None) All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliates, and may have been endorsed by CNBC Previously broadcast they appeared on television, radio, online or other media. The above is subject to our Terms and Conditions and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not apply to your particular situation. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor. Click here to view the complete disclaimer.
