Carnival stock price can gain 150% on this chart pattern

Carnival stock price can gain 150% on this chart pattern

  • State-owned Public Investment Fund buys a 8.2% stake in Carnival
  • In just two days the stock price gained 43% on Saudi news, after hitting 26-year low below the $8 mark
  • Price action is attempting to form a double bottom, a bullish reversal pattern that can push the price above t

Shares of Carnival Corp. (NYSE:CCL) soared 21% on Tuesday after it was revealed that the Saudi sovereign wealth fund bought a 8.2% stake in the cruise operator. The stock price now trades more than 50% off the lows, after shares lost around 75% of their value since the beginning of the year. 

Price action is now attempting to build a bullish reversal pattern which can facilitate additional gains of 150%.

Fundamental analysis: Carnival struggling to survive

The Saudi sovereign wealth fund purchased a 8.2% stake in Carnival, which helped lift the stock price more than 20% on Tuesday, in addition to gains of 20.26% on Monday when the news of Saudi’s involvement first appeared in the media. 

The fund purchased 43.5 million shares in Carnival as the world’s largest cruise operator is fighting to survive in arguably the biggest crisis the cruise industry has ever faced.

“In over 30 years, it’s unprecedented. We’ve never seen these types of warnings really ever,” said Stewart Chiron, cruise industry expert.

Last month, Carnival fully drew down its $3 billion revolving credit facility. The company insists it will continue to service its debts in the coming 12 months. 

“We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because we have never previously experienced a complete cessation of our cruising operations, and as a consequence, our ability to be predictive is uncertain,” said Carnival in the statement last week. 

“In addition, the magnitude, duration and speed of the global pandemic is uncertain”.

The Public Investment Fund (PIF) of Saudi Arabia is considered to be among the largest funds in the world. Invezz reported a few days ago that some of the world’s biggest sovereign wealth funds, including PIF, could dump more than $200 billion worth of stocks.

Technical analysis: Bullish reversal pattern in the making

The coronavirus-related stock market crash wiped out around 80% of the Carnival stock value in the past few weeks. Since then, the price action has been attempting to stage a recovery, although without much success.

Carnival stock daily chart (Tradingview)

The first attempt failed, which prompted the stock price to return and retest the multi-year low around the $8 mark. As a result, the price action has built two equal lows, setting up the base for a potential double bottom, a bullish reversal formation. 

For the pattern to be activated, a break above the $20 mark is needed. Ultimately, the double bottom pattern can take the stock price above $30 (the upper blue horizontal line). 

Summary

Carnival stock price jumped around 40% in just two days after the Saudi sovereign wealth fund purchased a 8.2% stake in the cruise operator. The stock price is now attempting to form a double bottom which could eventually take the price action above the $30 mark, from the current market price of $12.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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