Shares of the world's largest cruise companies have sunk in early 2020 amid an outbreak, and fears of an outbreak, of the deadly coronavirus disease on three cruise ships.

Carnival Corporation & Plc's (CCL) Diamond Princess sits docked in Yokohama, Japan, with 135 confirmed coronavirus cases. In the East China Sea, the Holland America liner Westerdam, also operated by Carnival, continues to search for a port to dock at after being turned away from both Taiwan and Japan over fears of passenger contamination.

Meanwhile, in Hong Kong, the World Dream cruise ship began disembarking passengers Sunday after the ship had been held in quarantine since docking Wednesday after eight former passengers tested positive for the virus. Both Royal Caribbean Cruises Ltd. (RCL) and Norwegian Cruise Line Holdings Ltd. (NCLH) last week banned Chinese, Hong Kong, and Macau passport holders from boarding their ships as a precautionary measure to try and stop the illness spreading.

Investors and traders with sea legs should monitor the three cruise companies outlined below as further news regarding coronavirus-stricken ships comes to hand. Let's look at how the virus may affect this year's earnings and identify possible buying levels using technical analysis.

Carnival Corporation & Plc (CCL)

Carnival operates a global cruise company with more than 100 ships sailing under brand names such as Carnival Cruise Line, Princess Cruises, Holland America Line, and P&O Cruises. Although the company estimates that coronavirus will affect its 2020 earnings per share (EPS) by between three and six cents, Wedbush analyst James Hardiman said that the cruise firm's lower exposure to China places it in a better position than its competitors. As of Feb. 10, 2020, Carnival stock issues a healthy 4.57% dividend yield but is trading underwater by 17% on the year. 

Carnival shares have fallen sharply since topping out over December and January. Declines may continue in the short term as coronavirus-related news drives sentiment. Traders and investors should look for buying opportunities at the $40 level, where price finds support from the prominent October swing low. A move into this area would also push the relative strength index (RSI) deeply into oversold territory, increasing the chance of an upside reversal.

Chart depicting the share price of Carnival Corporation & Plc (CCL)
StockCharts.com

Royal Caribbean Cruises Ltd. (RCL)

Royal Caribbean Cruises operates around 60 ships across six global and partner brands, including Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises, Silversea, and TUI Cruises. The Miami-headquartered leisure company projects this year's adjusted EPS to fall in a range between $10.40 and $10.70, with a bottom-line hit of 25 cents per share from eight canceled China cruises and modified itineraries. China represents 6% of Royal Caribbean's 2020 capacity. Royal Caribbean stock has a market value of $23.38 billion, yields 2.27%, and is trading down 16.45% year to date as of Feb. 10, 2020.

The cruise company's share price has been in free fall since mid-January, with further losses on the near-term horizon likely. Look for buyers to return at $100. Not only does round number psychology come into play, but the area also provides significant support from a double bottom carved out during the fall. Before committing capital, traders should think about waiting for a candlestick reversal, such as a bullish engulfing pattern, to form and suggest a change in underlying momentum.

Chart depicting the share price of Royal Caribbean Cruises Ltd. (RCL)
StockCharts.com

Norwegian Cruise Line Holdings Ltd. (NCLH)

With a market cap of $11.24 billion, Norwegian Cruise Line operates as a global cruise company, targeting both the freestyle and luxury cruising markets. Wall Street expects the firm that owns brands Norwegian, Oceania, and Regent Seven Seas to deliver EPS of 70 cents when it reports later this month. While this represents an EPS contraction of 18% compared to the year-ago figure, watch for an earnings surprise given the company has surpassed analysts' bottom-line expectation in the past 11 consecutive quarters. Norwegian stock has tumbled nearly 10% so far this year as of Feb. 10, 2020.

Even though none of Norwegian's ships have recorded cases of coronavirus, the company's stock hasn't escaped the bears' wrath over the past month. Its share price closed below the 200-day simple moving average (SMA) on Friday, Feb. 7 – a move that could trigger additional selling in the days ahead. Those interested in buying should look for an entry near $50, where price looks well supported from a previous eight-month trendline.

Chart depicting the share price of Norwegian Cruise Line Holdings Ltd. (NCLH)
StockCharts.com