COVID-19, or the coronavirus as it is commonly known, is taking its toll on the travel industry. Cruise ship operators are among the hardest hit as ports refuse docking to ships with infected passengers on board. The share price of Royal Caribbean Cruises, for example, is down over 52% in less than two months.
The virus is obviously going to cause problems and profit declines for many industries. However, similarly to Zika, SARS, Ebola and all the others before it, COVID-19 is unlikely to bring the doomsday scenario many fear.
Hence, many stocks sold off not because of actual business deterioration, but because investors succumbed to the panic. As the outbreak passes and things normalize, those same stocks should rise again. Besides, the crash in Royal Caribbean seems to fulfill a textbook Elliott Wave pattern. Take a look below.
Royal Caribbean Cruises Ltd Weekly Chart
RCL’s weekly chart reveals that the uptrend from $5.40 in March 2009 is a five-wave impulse. The pattern is labeled (1)-(2)-(3)-(4)-(5), where the structure of wave (3) is also visible. A three-wave correction follows every impulse and that is what’s been in progress since January 2018.
Royal Caribbean Opportunity Amid Coronavirus Panic
Royal Caribbean Cruises Ltd (NYSE:RCL) has been a disappointing investment for the past two years. The reason is that a regular (a)-(b)-(c) flat correction has been unfolding. Waves (a) and (b) are simple a-b-c zigzags. The sharp plunge in wave (c) coincided with the coronavirus outbreak.
The decline already reached the support area of wave (4), where corrections often terminate. The theory states that once a correction is over, the larger trend resumes in the direction of the impulsive sequence. If this count is correct, we can expect a bullish reversal soon.
The coronavirus aside, we think Royal Caribbean stock carries a lot less risk now than two months ago. The stock’s halving looks like an investment opportunity. However, make sure you understand the company’s fundamentals, as well.