The world just endured the toughest test in recent history. The pandemic was a human tragedy and business disaster of epic proportions. It’s only normal to have stocks still bare scars from it, which is the case with Carnival Cruises (NYSE:CCL) stock.
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This is a stock still deep down on its luck.
The company’s problems materialized through no fault of its own. One day Carnival Cruises was a thriving business, and the next it had no revenue. The world closed for business almost a whole year. It’s a miracle Carnival and companies like it survived. This is testament to a competent management team. One that will surely be able to pick up the pieces and put them back together.
Luckily there is light at the end of the tunnel. The United States reopened for business thanks to the vaccine. Everyone that wants one already has it, and there’s plenty more vaccine for the stragglers. As long as we don’t have a new shoe to drop, CCL stock should have better days ahead.
CCL Stock Has More Room to Make Up
Source: Charts by TradingView
The bad news is the stock is still down almost 40% from the accident scene back in February 2020. But that’s also the good news, because it has that much to make up still. Furthermore, the bulls made tremendous technical headway. They have set steady ascending trend of higher-lows. CCL stock spent almost the last half of 2020 consolidating to build its base. Then in the fall it sprang to action – and it hasn’t stopped.
Fundamentally, it’s useless to evaluate worth from current financial metrics. Business is still far from normal operating procedures. It will take time for them to ameliorate the profit-and-loss statement. Until then we should draw on business activity trends, more than financial results. As long as they continue in the right direction, I expect the metrics to normalize into place.
Investors in CCL stock should realize that there will be resistance going into $32 per share. Luckily there is also strong support just below $24. This gives the upper hand to the bulls given the positive momentum they carry. The assumption is that ascending channel continues and the stock breaks out from $32 per share. This would finally have enough to recover the February 2020 levels. I pointed out the importance of these levels in January. They continue to play an important role now.
Fear the Fed
The brave one who bought the dips received good rewards already. I caution overstaying their welcome in profitable trades this year. Equity markets are at all-time highs making for a precarious setup. The bulls have been incredibly aggressive and that is dangerous.
Not enough investors are looking down for potential pitfalls. Evidence of this is how low the CBOE Volatility Index (VIX) has fallen. It should be higher since we know we are facing a taper event.
When the taper happens, it’s not a headline we can ignore. It actually changes the flow of money in the economy. Those are the headlines to heed because they have lasting and trend-building effects. In 2018, the markets crashed into Christmas. That’s when the Fed capitulated and changed its policy from tight to loose. We are now going into the opposite event and no one cares.
The bottom line is that I am a fan of how CCL stock has traded. But I would also suggest investors trim some profits as a hedge. Staying all in all the time works in an extremely bullish market. We don’t know if we’re going to have that premise at the beginning of 2022.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.