Carnival Corporation: CCL bounce this week places it at crucial resistance

  • Despite Thursday decline, CCL price still hugging top trend line.
  • New bond issue reduces debt payments with lower interest rate.
  • Carnival might reach 75% capacity by end of 2021.

The good news keeps arriving for Carnival Corporation (NYSE: CCL). After announcing on Tuesday that it was projecting to reach 65% to 75% capacity by year-end, the embattled cruise leader announced the closing of a $2.4 billion bond issuance at a much lower interest rate.

Carnival Stock News: Good winds blowing for CCL

After three days of high volume and even a gap up to boot, CCL stock lost ground on Thursday, down 2.1% at $22.71. Even the dip there, however, was a silver lining. The early session pullback pushed Carnival down to just above the 9-day Simple Moving Average (SMA) at $22.11. From here, CCL price bounced to end the day more than 2.3% off the low, providing the daily chart with a bullish long lower wick.

Management's call on Tuesday surprised investors still reeling from Monday’s Delta panic. Top leadership said with increased current travel and bookings that the cruise company would make it back to 65% of capacity by year-end. Additionally, they were confident that if things kept improving at the same pace in the second half of the year, then 75% capacity is a real possibility.

Next on Wednesday, Carnival announced a deal to sell $2.4 billion in bonds in order to retire junk bonds issued at the height of the pandemic with an 11% coupon. This was back when some had doubts about CCL as an ongoing concern. The new bonds are not due until 2028 and offer a much better 4% coupon, which demonstrates that the market now accepts the Carnival turnaround saga. CCL sailed upward on the news.

All the while, Carnival has been using its $9.3 billion in cash to buy up its own shares. Since June 30, the company has taken 1,875,127 shares off the table. This is a long-term bullish activity since shares held within the corporation are not counted in the daily float and, thus, reducing the supply.

CCL chart: Can Carnival swim past trend line barrier?

Pre-pandemic, the stock was trading around $50. Since April 2020 when it bottomed out at $7.80, CCL stock has been on an even upward keel. It seems the Dave Portnoy's and YOLO-crazed RobinHooders may have been right on this one. After consolidating in late June above $30, however, CCL stock has backtracked severely, losing about a third of its market cap.

Since the June highs, the stock has receded in a rather narrow descending channel. Wednesday’s gap up and Thursday’s semi-bullish doji both sit right on the top trend line. Friday's price action will tell the future. Either CCL lets go and falls to the bottom trend line near $19.28 or it uses Thursday’s bounce off the 9-day SMA to rise to $24.12 – the 20-day SMA that it has not touched since June 17. If it makes it past here, there is further support-turned-resistance at $24.85 from March and May. At 41, the Relative Strength Index (RSI) remains in bearish territory.

CCL 1-day chart


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