Trading Nation

Royal Caribbean could have the most potential as Carnival sets sail in Europe, trader says

Trading Nation: Carnival to set sail in Italy, two experts on what it could mean for the rest of the sector
Trading Nation: Carnival to set sail in Italy, two experts on what it could mean for the rest of the sector

It's a crucial time for the cruise stocks.

Carnival's Costa Cruises set sail in Italy over the weekend in what investors view as a litmus test for the how the rest of the industry can resume operations in a pandemic.

Gina Sanchez, CEO of Chantico Global, says this is a moment for Carnival and its peers to prove themselves.

"This will be an important test. If they can prove that they can do this safely, I think that would be enormous for the cruise stocks," Sanchez told CNBC's "Trading Nation" on Friday. "The demand is there. You just have to show that it can be done safely."

Which cruise lines come out on top depends on the amount of cash in their coffers, says Sanchez.

"These cruise stocks just have to survive and they have amassed a mountain of cash," she said. "You look at Carnival. Carnival has a cash burn rate of about $650 million, and they're sitting on $7.8 billion of liquidity. And so I think they can stay afloat. They just have to prove that this is possible."

Matt Maley, chief market strategist at Miller Tabak, says Royal Caribbean looks best positioned from a technical point of view.

Royal Caribbean had "a bigger rally during the spring and summer months, and then it kind of rolled back over," Maley said during the same "Trading Nation" segment.

Since then, he said, it made a higher low, a positive development that suggests a limit to downside selling pressure.

"Now it's starting to rally back up, and it's trying to follow that higher low with a higher high. If it can do that, above $75.50, that will also take it above its 200-day moving average, which would also be bullish," he said.

Royal Caribbean closed Friday at $71.95 a share, but was down 2% in Monday's premarket at $70.39. It would need to rally 7% to reach $75.50.

"If it can break that $75.50 level in any meaningful fashion, I think Royal Caribbean will be the one that has the most momentum as they go into the winter cruise season," said Maley.