In my June 12 review of Carnival Cruises (CCL) , I wrote that "Traders who went long CCL in May and added to longs at $12 should continue to hold those positions. Raise stops to $11. $21 and $27 are my price targets now."
Prices stalled in the $16 area earlier this month and have gapped lower Monday. Let's check out the charts and indicators to see if we need to tweak our strategy.
In this daily bar chart of CCL, below, I can see how prices are pulling back. Prices gapped higher earlier this month and gapped lower today. Some old-time chart watchers will probably call this an island top reversal. Prices are still above the rising 50-day and rising 200-day moving average lines. The On-Balance-Volume (OBV) line stalled in mid-June and could lower today. The Moving Average Convergence Divergence (MACD) oscillator is crossing to the downside for a take -profit sell signal.
In this weekly Japanese candlestick chart of CCL, below, I can see that prices made a spinning-top pattern after a rally. This is two-thirds of a potential top-reversal pattern. Top reversals can be either turns to the downside or turns sideways. Stepping back from the chart a bit, I can see that prices trade above the rising 40-week moving average line. The weekly OBV line shows strength from last June. The MACD oscillator has been moving up from last July and is now above the zero line.
In this daily Point and Figure chart of CCL, below, I can see that prices have reached and exceeded a downside price target in the $15.51 area. Point and Figure charts fill in price gaps as if there was trading at those prices.
In this weekly Point and Figure chart of CCL, below, the chart still shows us an upside price target in the $30 area.
Bottom line strategy: It is always a tough call when a stock pulls back. How deep will it go? In a strong stock market, pullbacks tend to be shallow. In a weak market, pullbacks can be deeper. A correction down to the $12 area on CCL would not surprise me.
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