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'All hope is not lost' for cruise stocks as they near key technical support levels, trader says

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Trading Nation: Cruise stocks rise after Trump promises help

Cruise stocks are mounting a comeback.

Shares of Carnival, Royal Caribbean and Norwegian Cruise Line Holdings rose Tuesday after sustaining double-digit losses on Monday that were fueled by fears of the spread of the coronavirus and a broader market sell-off. The State Department this week said people "should not travel by cruise ship" because of the health risks.

The stock group lifted after President Donald Trump said his administration would work with the cruise and airline industries to try to stem the damage to their businesses.

Carnival rose by nearly 10.5% Tuesday but was still down over 11.5% in the first two days of this week. Royal Caribbean gained more than 7% but still had fallen 20.5% in the first two days of the week. Norwegian rose 3.5% Tuesday but was down 24% on Monday and Tuesday. Tuesday was the S&P 500's best day since December 2018.

The group is still nowhere near positive for 2020. Carnival is still down nearly 53% year to date, Royal Caribbean is down more than 61% and Norwegian is down about 65%.

Earlier Tuesday, S&P Global Ratings put Royal Caribbean and Carnival on CreditWatch with a negative slant, meaning the companies' debt ratings are at risk of falling this year, according to S&P.

But with many stocks closing out Tuesday well in the green, it's possible that "all hope is not lost" for the downtrodden cruise stocks, said Todd Gordon, managing director at Ascent Wealth Partners.

"If we look at the history of Royal Caribbean, ... you can see we've got a series of old highs here that was formerly acting as resistance," Gordon said Tuesday on CNBC's "Trading Nation."

"Now, we're coming back and we are holding support. That's right around the $45 mark," Gordon said. "That's a long way from the old high up around 150. So, above 45 and all hope is not lost."

In Wednesday's premarket, Royal Caribbean was at $48.11, down 6.89%. He said his firm sold out of its position in Royal Caribbean earlier this month.

Carnival didn't look as attractive to Gordon on Tuesday.

"Carnival is technically not looking as good," he said, noting that the stock has made "a series of double bottoms" near its support level of roughly $17 and "really need[s] to stay above there."

"But we are, in fact, a little bit more hopeful," Gordon said. "There's a $120 billion travel budget for the baby boomers out there. They're taking more cruises. If this thing were to subside, we do see value [and] we might reenter the position in Royal [Caribbean]."

Gina Sanchez, founder and CEO of Chantico Global, wasn't as eager to buy into the group.

Asked if the stocks' depressed valuations — which now range from 4 to 6 times forward earnings — looked compelling, Sanchez replied, "Not yet."

"If you look at the whole tourism segment, I think that this is going to be painful for all of them, but airlines will likely recover. People will get back on planes. I think that hotels will also recover. But I think cruises may actually have a hard time," Sanchez said in the same "Trading Nation" interview.

"These valuations don't reflect that new reality," she said. "So, I'm waiting and seeing."

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