Royal Caribbean's Stock Soars To New Highs: What's Next?

Royal Caribbean Cruises Ltd RCL soared more than 10% higher at one point on Friday after Pfizer Inc. PFE said its experimental antiviral COVID-19 pill, PAXLOVID™, reduced the risk of hospitalization or death by 89% and it plans to submit the data to the FDA for Emergency Use Authorization.

The travel sector took off on the news with shares of Boeing Co BA gaining more than 4%, while shares of American Airlines Group Inc AAL were trading almost 7% higher at the start of the trading day.

On Monday, BofA Securities analyst Andrew Didora said in a note he expects Royal Caribbean’s fleet to be back in full utilization toward the end of 2022.

Even though that may be a year off from now, the stock market is forward-looking and places more emphasis on events expected to happen rather than events that have already happened. With the vaccine roll-out well underway and new treatments becoming available to help those affected by the virus, paired with pent-up demand, cruise lines and airlines could return to pre-pandemic passenger levels even sooner than analysts estimate.

The Royal Caribbean Chart: Royal Caribbean gapped up over 5% higher on Friday morning, which propelled the stock straight up over a resistance level at $90.93. The stock then ran further north as more traders and investors piled in.

Royal Caribbean reversed to the upside on Oct. 28, the day prior to its quarterly earnings print. Technical traders may have known the stock was about to change course because, on that date, Royal Caribbean printed a bullish hammer candlestick on the daily chart, which often comes at the bottom of a downtrend.

The cruise line will eventually need to enter into a period of daily consolidation. The consolidation may come on Monday because, on Friday, Royal Caribbean looked to be printing an inverted hammer candlestick, which indicates lower prices or sideways trading action may be in the cards.

Consolidation is also needed to lower Royal Caribbean’s relative strength index (RSI), which is running hot at about the 71% level. When a stock’s RSI reaches or exceeds the 70% level it becomes overbought, which can be a sell signal for technical traders.

There is a new gap below on Royal Caribbean’s chart between $98.88 and $93.39. Gaps on charts fill about 90% of the time so it is likely the stock will trade down into the range in the future. There is also a gap above, between $101 and $105.15, left behind on Feb. 24, 2020, that Royal Caribbean is likely to fill.

Royal Caribbean is trading above the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 50-day simple moving average, which indicates longer-term sentiment is bullish.

• Bulls want to see continued consolidation, at least on lower timeframes, and then for big bullish volume to push Royal Caribbean up above $97.72. If the stock can regain the level as support it has room to trade up toward the $100 mark.
• Bears want to see big bearish volume come in and drop Royal Caribbean into the lower gap. The stock has support below at $94.55, $90.93 and $87.47.

Photo: Courtesy Royal Caribbean Cruises