These 3 Companies Are Riding Big Waves

The cruise business continues to float along with bigger ships to more locations. Most of the cruise lines have new ships arriving with more unique spaces to occupy the travelers’ interests while on board. Interestingly, the cruise ship company charts all look similar and they have entered some rough seas over the past year.

Royal Caribbean is getting close to the 2018 highs which coincided with the September 2018 top of the overall market. You can see a similar rhythm to the $SPX pattern of the January 2018 and September 2018 highs. The chart looks generally weak, as the PPO indicator which displays momentum has been trending lower. We are about to test the trend shown in blue to see if the momentum can break out of the down trend.

While we don’t know the answer yet, this is typically how a topping pattern would play out. After a series of lower highs in momentum, the PPO indicator would roll over near zero and price would accelerate lower. Conversely, we can see back in 2016, the stock never rallied much off the 2016 lows but rallied on the November 1 Fed meeting and the November 8th election. Perhaps we’ll see some sort of catalyst to get this heading to new highs on the open seas.

Looking on the chart, you’ll notice an increasing dividend shown in the boxes just above the date. The $130 area directly above will be an important level to watch closely as that is where the stock ran out of buyers before. Some big buyers will need to be willing to pay higher prices than ever before and that usually needs a major new catalyst.

The Norwegian Cruise Lines (NCLHWealth Strength IndexAAPL is Extremely Up and trending Up) chart is actually a little better than the RCL chart above. The PPO in the bottom panel is already moving above zero and the trend line is below zero so this is usually a good setup to start an uptrend in momentum. Momentum usually has to improve before the stock price will start improving. The relative strength shown in purple has already broken the down trend as well. You can see when the stock did that in 2016, it started a nice big bull move. Price is currently testing the trend line and a breakout would be very bullish. The SCTR ranking, is a measure that compares the speed of the stocks’ price move against its peers. The SCTR indicator is suggesting this is becoming one of the faster moving stocks as it goes above the 75% level into the top quartile.

Carnival Cruise lines chart is the weakest. The stock has declining tops and the last low was a significant washout. This is not a bullish pattern, but some of the chart’s features suggest we’ll find out soon if this can change trend. I would want to see the relative strength in purple break the down sloping trend line. As long as the stock continues to underperform the index, there is no reason to want to own it. If it starts to outperform, that is usually a sign that something is changing in the investor attitudes towards the stock. The PPO indicator looks like it is crossing above the down-sloping blue trend line while below zero. This can be a bullish development. Continued success will be when the PPO breaks above the line and continues to move above zero accelerating with positive momentum. I have put a previous trend line in red, that looked like a pretty good trade setup, only to roll over at zero at the red arrow. Notice the sudden reversal on the price chart at the late September 2018 highs. Ouch.

In general, the cruise line charts are stuck in port. The Norwegian chart looks the best of the group. The $60-$65 level on NCLHWealth Strength IndexAAPL is Extremely Up and trending Up will be a big multi-year top to hurdle. The reason I covered the stocks this week, is it looks like they are about to test prior highs.

If the industry group starts to run, the charts should start to accelerate as they change momentum. If they don’t I’d continue to let someone else own the shares for now. The charts have bigger waves rolling over more often now than any time through the last 5 years. No need for rough seas in your portfolio if you can avoid it.