Cruise Line Stocks Sailing After Favorable Court Ruling

Cruise line stocks posted gains Monday after the U.S. Court of Appeals reversed its previous ruling that the U.S. Centers for Disease Control and Prevention (CDC) could enforce its Conditional Sail Order, imposing restrictions on whether cruise lines could operate carrying unvaccinated passengers after July 18. The development comes at a pivotal time for the industry as it tries to balance more sailings in the second half of the year while not putting public health at risk as the vaccination rollout continues.

Let's take a closer look at the two largest cruise line stocks in the S&P 500 and analyze the charts to identify possible trading opportunities.

Carnival Corporation & plc (CCL)

With a market capitalization of $26.8 billion, Carnival Corporation & plc (CCL) takes the mantle of the world's largest cruise company, with the aim to have 52 of its ships operating through a phased return by the end of the year. Although the company reported a second quarter (Q2) loss of $1.80 per share, the hit was less than the loss of $3.30 per share posted in the year-ago quarter. Moreover, Q2 booking volumes for future cruises increased 45% on a sequential basis, indicating improving conditions on the horizon. As of July 27, 2021, Carnival stock has gained more than 50% over the past year but sunk 17.67% in the past month amid concerns over new strains of COVID-19.

Recent price action in Carnival shares has turned more bullish after the stock poked above a six-week downtrend line and came close to reclaiming the 200-day simple moving average (SMA). Additionally, the moving average convergence divergence (MACD) indicator confirms shifting sentiment, with a cross above its trigger line generating a buy signal. Those who buy at these levels should target a move to key overhead resistance at the psychological $30 area. Manage risk by placing a stop-loss order somewhere beneath the July 21 gap day low at $21.67.

Royal Caribbean Group (RCL)

Royal Caribbean Group (RCL) plans to progressively increase its sailing schedule through the late summer and early fall with the intention of becoming fully operational by the end of 2021. On the earnings front, Wall Street expects the Miami, Florida-based company to disclose a Q2 loss of $4.38 per share, indicating a year-over-year improvement from the June 2020 reported loss of $6.13 per share. Analysts will also be looking for the company to continue its robust booking momentum that saw new bookings in March exceed January and February levels by approximately 80% on the back of pent-up demand. Royal Caribbean stock has a market value of $20.6 billion and is trading 60% higher over the past year as of July 27, 2021. However, the shares have eased 9.35% in the past month.

While the Royal Caribbean share price sits just below a six-week trendline, Monday's close above the 200-day SMA could act as a catalyst for further buying in the days ahead. Like Carnival, the MACD indicator recently crossed above its trigger line, giving bulls the confidence to test higher prices. Active traders who enter here should consider booking profits on a run to horizontal line resistance at $95 while protecting capital with a stop placed under last Wednesday's low at $75.63.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.