PreMarket Prep Stock Of The Day: Royal Caribbean

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

As the U.S. attempts to reopen the economy it has been anything but smooth sailing and that doesn't bode well for the cruise line industry. Although we didn't get a chance to cover the technicals of Royal Caribbean Cruises Ltd RCL on today's show, it will be covered on the afternoon show "At The Close."

Leaking In January: Despite the rally in the broad market to start the year, Royal Caribbean didn't participate. In fact, it went in the opposite direction in a significant way. After ending 2019 at $133.51, it peaked in early January and matched its all-time high from January 2018 ($135.65) and sharply reversed course.

It ended January just off its low for the month ($115.49) at $117.08 for a 12% decline.

No Lifejackets Around: During the unabashed selling over the next two months, cruise lines and airlines were amongst the hardest hit for obvious reasons. Following one of its worst months in years, the next two were small in comparison to January’s decline.

In February, the issue fell to $70.50 but rebounded to end the month at $80.41, another 31% decline. In March, it sank to $19.25 but rebounded to end the month at $32.17 for another 60% decline.

That low coincided with its October 2011 low at $18.70.

Slow To Leave The Dock For A Rebound: While tech stocks and several other sectors set sail off the March lows, Royal Caribbean had a harder time mounting a rally. In April and May, it grinded its way higher, ending May at $51.97 for a solid 170% rebound from its depressed low.

It added to those gains in the early part of June, reaching $75.55 on June 8, but has come under selling pressure.

Negative News Flow Submarines Rally: Its share price had been sinking since climbing over $75, dropping to $62.50 over the next six sessions and the pace of decline has accelerated. Although Norweigan Cruise Lines NCLH announced last Tuesday that cruises won’t take to the seas for another few months, Carnival Cruise CCL and Royal Caribbean didn't pull the plug until Friday.

Corresponding Price Action: Royal Caribbean was battered on the Norwegian Cruise Line news, falling from $62.50 to $58.03 on Wednesday. It did stage a modest rebound on Thursday to $59.35,

However, the company’s confirmation of its own suspension of cruises sent the issue tumbling to $55.27 on Friday. The issue deep in the red again, down 7.8% to $50.91 at the time of publication on Monday afternoon.

Moving Forward: Since the issue has had a significant retreat off its recent high, more than likely investors will be bottom-fishers in the issue. Based on the daily charts, there are a pair of lows from May 27 ($49.30) and May 29 ($49.09), which comes under its current daily low of $50.35.

If looking for a more significant retreat, the 50% retracement of its rally from $19.25 to $75.15 comes in at $47.20, which is in the area of its May 26 low ($46.67).