The Carnival share price succumbed to a tsunami of selling, suffering its biggest one-day decline in over a year as markets brace for a new infection wave.
Carnival plc (LON: CCL) sank 8.27% to 1,297p in London as investors react to the worrying spread of the delta variant Covid-19 strain.
Tourism, travel, and leisure stocks were hit particularly hard. However, Carnival fared worse than rivals, Royal Caribbean cruises Ltd (-3.98%) and Norwegian cruise line Holdings Ltd (-5.49%).
In the last two weeks, Global infection rates have soared by 34%. Fatally for Carnival, the US has reported a 140% surge in cases during the same period.
The accelerating outbreak could not have come at a worse time for the worlds largest cruise line. Earlier this month, the Carnival Vista vessel embarked on its maiden cruise from the US in 2021.
Furthermore, optimism was returning to the share price, and on the 7th of June, CCL was trading at 1,890p and on the verge of breaking above long term resistance. Less than two weeks later, the Carnival share price is 33% lower and now breaking down.
Looking at the daily price chart, we see that Carnival is accelerating south after breaching two key support levels.
Firstly, the price is now below the 200-day moving average at 1,438.80p, which indicates CCL has reverted into a bear market. Furthermore, the 50 DMA at 1,664p will soon complete a bearish crossover of the 100 at 1,660.20p.
Notably, the slide beneath 200 DMA also left the support of a trend line at 1,413p in its wake. This now signals a long term uptrend could be the next port of call for the share price.
The trend from the 581p, April 2020 low is visible at 1,130p. I would view this as a critical threshold. A close beneath this level could instigate a deeper decline, which targets the horizontal support of the August 2020 low at 794p.
However, the Relative Strength Index (RSI) reading of 15.06 points to Carnival shares being way oversold. Although this does not suggest an imminent reversal, it is a potential bullish catalyst should the outlook improve.
That being said, the bearish view remains intact unless the price recaptures the trend line support-turned-resistance and the 200 DMA at 1438.80p.
Follow Elliott on Twitter.
