Time to Jump Ship on Carnival Stock

Options bears have already taken a liking to the cruise concern

Deputy Editor
Feb 6, 2019 at 2:23 PM
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The shares of Carnival Corp (NYSE:CCL) have rallied off their Dec. 26 two-year low of $45.64 -- up nearly 29% since this bottom -- and recently closed their Dec. 20 post-earnings bear gap. However, the stock has sounded a historically bearish signal amid its rebound -- a sign that could suggests CLL could be headed for choppy waters. 

The cruise concern is trading within one standard deviation of its 180-day moving average after a lengthy dip below the trendline. This signal has flashed four other times in the past couple of years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. The stock averaged a one-month loss of 10.1% after these prior signals, with each return negative. Based on the equity's current perch at $58.28 -- down 0.5% so far today -- a similar move would put it back near $52.40. 

CCL Feb 6

Based on these past returns, it could be a good time to speculate on CCL with options. The stock's Schaeffer's Volatility Index (SVI) of 19% ranks in the 6th annual percentile, meaning short-term options are pricing in relatively low volatility expectations at the moment.

It seems that options bears have already taken a liking to Carnival stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CCL's 10-day put/call volume ratio of 2.06 ranks in the 86th percentile of its annual range. This means that puts have been bought to open over calls at a much faster pace than usual.

CCL could be vulnerable to analysts downgrades, though. Currently, the equity sports 10 "strong buy" ratings, five "holds," and not a single "sell." What's more the consensus 12-month target price of $67.05 is a 15% premium to current levels -- a potential catalyst for more headwinds should the stock continue to sink. 

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