One of the best performing equity sectors of 2015 has been the cruise lines. Even after today’s sector wide sell-off Carnival Corporation (CCL) is up 10.42%, Norwegian Cruise Lines (NCLH) is up 21.92%, and Royal Caribbean Cruises (RCL) is up 11.1% year to date.
However, there are signs that the run may have come to an end. All 3 above mentioned stocks have charts which are exhibiting significant topping patterns that are in early stages of forming. NCLH, in particular caught my attention due to its 40x P/E ratio, 2.3% short interest and a very clear double-top which was put in place during the last couple of months:
There is a clear support/resistance band near $55 which if broken would cement the double-top pattern and target a move down to the next support/resistance band near $47-$48 (January highs/May lows).
While the ‘fundamental’ story supporting the cruise lines (Cuba is opening, these companies have locked in cheap fuel prices for at least the next couple of years, etc.) is solid, the charts are indicating that the good news has been discounted. Another warning sign comes in the form of the fact that the sell-side is virtually unanimously bullish on the sector:
NCLH broker recommendations
RCL broker recommendations
The crowd is usually right, then badly wrong at key market turning points. We could be at such a turning point for the cruise line space. At the very least investors/traders have some clearly defined levels to use as key reference points going forward.