Carnival Corporation & Plc (CCL) shares fell nearly 4% during Thursday's session after a passenger from Macau was put in isolation off the coast of Italy on suspicion that she may have the coronavirus. While she was eventually cleared, investors worry that the episode and growing spread of the virus could have a negative impact on the cruise line industry.
Wedbush analyst James Hardiman said that the cruise line operator could be in a better position than its competitors due to its lower exposure to China and greater flexibility when reporting its earnings since it's not due to release results until March 24, 2020. The analyst maintains his Neutral rating and $50 price target on Carnival stock, reflecting a 12% premium to Thursday's close. Royal Caribbean Cruises Ltd. (RCL) and Norwegian Cruise Line Holdings Holdings Ltd. (NCLH) shares fell by a similar amount during Thursday's session.
In early January, Carnival announced that it would launch four new cruise ships in 2020 and add 16 new ships to its fleet by 2025. Newer vessels are powered by liquefied natural gas, which burns a lot cleaner than conventional maritime fuel sources like bunker fuel.
From a technical standpoint, Carnival stock broke down below the neckline of a double top pattern to December levels. The relative strength index (RSI) fell to nearly oversold levels of 34.63, but the moving average convergence divergence (MACD) accelerated its bearish downturn. These indicators suggest that the stock could see a brief reprieve, but the trend is bearish.
Traders should watch for a breakdown from trendline support at $42.42, which could lead to a move down to reaction lows of $39.92. If the stock rebounds, traders could see a move toward the neckline at $45.25 or a move toward the 50-day and 200-day moving averages near $47.50, although that scenario appears less likely to occur given the bearish price action.
The author holds no position in the stock(s) mentioned except through passively managed index funds.