Carnival Corp NYSE:CCL. This one’s too easy Captain!
I’ve laid out a few arguments below on what I think is going on. It would be worth your while working through the detail as I think there’s a good trading opportunity in this for you.
Firstly, if you have a look at my Elliott Waves 1 and 2 (Orange colour “W1”,”W2”) that’s a typical retrace to 61.8% and is proportional in relation to the larger chart, so pretty confident that’s a valid W1-W2 read and hence the stock has been in a strong Wave 3 since 2012. This monthly chart is a bit messy on the left half of the page but I think I can ignore that. So assuming a recent Wave 3 is correct, we can then make some calculations on it’s likely top.
Have a look at the Dark Blue levels marked down the far right side of the chart. W3 typically runs up to 162% of the W1-2 length. So that’s still a possibility and I’ve marked “W3?” faintly as a possible alternative, but not my preferred scenario. Wave 3 can also top at 127.2% and you can see the last bar has stopped just under this. I’m thinking therefore that the top of Wave 3 is in, but need other evidence.
If you have a look at the Mustard coloured levels with the 100% extension at $67.770, you can see a three-leg A-B-C pattern running up from W2. Although 100% extensions won’t stop an uptrend it is very common for a trend to pause at such a level. Further, if you look at the bright pink levels marked above “W1” there is a 127.2% retracement of the fall from 2004 to 2008 which clusters with these other two levels (W3 127.2% and 100% Extn). So I’ve boxed all three in the light blue shading as a major resistance zone.
I haven’t shown the Weekly chart here, but there was a strong uptrend line under that recent run that got broken two weeks ago. The stock then retraced back up last week to the breakout point, which is typical last hurrah behaviour before it falls away, which it started to in closing the week poorly on Friday.
So putting all that together, you have a 127.2% likely top of Wave 3; clustered with the 100% ABC extension: and the 127.2% retrace of the earlier major down range; together with the weekly chart showing a breakdown of the major trendline, I’d suggest pretty strongly that the top of Wave 3 is in and the price will now move into a Wave 4 pullback.
Wave 4:
This is usually a more sideways to down pattern, compared to the sharper fall into Wave 2. Usually a clear three subwaves. Often the first fall is a quick 25% of the immediate prior range (marked at 62.537 in light pink), a bounce and then it will continue on down more slowly to complete at 38.2% of Wave 3. I’ve marked this in Orange levels and Orange shaded area.
This also clusters with horizontal support at $54 and also 50% of the last leg of the prior up range, so fairly predictable here. The alternative view is that small pink box highlighted at 25% of Wave 3 or 38.2% of the prior up range. It could pause here but more likely will continue down to the orange zone.
Timing: Wave 4 should take longer than Wave 2, which was 9mths as it’s more of a sideway move to soak up time. I’ve marked 15mths with the vertical lines out to Dec18 but there are no rules around this, it’s just a plug figure. This aligns with the sharp rise up over the past 12mths, where you’d expect it would have to work off some time here for a while given how steep that run was.
(One other minor point is that I put a dotted pink line through the tops of the three peaks right across the chart. This is pretty meaningless and I actually don’t like showing it on my chart, but a few amateur TA’s might take it as a sign of a peak and sell in support of the turndown).
Conclusion:
Although an alternative view is plausible of a continuation up to the faded “W3?” Level at 162% projection, I don’t think so. My best judgement is that you’ve just seen the peak of this run, however it should only be a shallow Wave 4 pullback to the 38.2% level at $54-55. (A possible higher support point to watch though is $58-60 in pink shading).
The blue dashed zigzag down lines is my preferred roadmap, competing at the orange shaded 38.2% level in maybe 15mths time. It won’t follow this exactly, this is just a roadmap of the sort of thing that should now occur.
How to trade it:
This is the perfect situation to write a series of covered call options against your position as Wave 4 plays out. That could be a great trade. The stock is $65.94 now and I’m suggesting the most likely path is a fall to a maximum of $54-55 before heading back up into Wave 5. A projection for Wave 5 counting the current Wave 3 top and say a $54 Wave 4 low, would be $85.
So if you’ve held it for a few years, I wouldn’t think I’d sell any here if the fundamentals are still good, rather I’d be looking to wait out the pullback and keep holding until you get that $85 or something final W5 top. Problem is you have a good 12mth plus to wait out a likely sideways to down more. Perfect trade to me is to write Call options against your position for income, every two months or so “At-the-Money” Call's until it finds its support level.
If you don’t normally use Options, might be time to Google “Covered Calls”.
Good luck with it.
Will be an interesting one to me to follow up in a few months. If I'm wrong and it continues higher, I don't think that's going to worry you anyway!
View attachment 732837
(20min delay)
