The travel and tourism trade has been struggling in 2025, particularly for US-based names including airlines and cruise lines. While shares of Royal Caribbean Cruises (RCL) are currently down about 22% off their January peak, this cruise line is now testing key price support and could be setting up for a decent recovery trade. At the end of January, RCL had bounced off its 50-day moving average to achieve a new all-time high around $275. A gap higher around January earnings, however, can now be labeled an "exhaustion gap" as it represented the last gasp higher after an incredible bullish run going back to early 2023. From there, shares of RCL have demonstrated a clear short-term downtrend of lower highs and lower lows, bringing the price down to its 200-day moving average for only the third time in the last three years. The two previous tests of this long-term trend barometer, in August 2024 and October 2023, have seen a dramatic upside reversal and eventual new highs. What would suggest a similar path into Q2 2025? We can see that the Relative Strength Index (RSI), my preferred method of measuring price momentum, is showing a very similar pattern to those previous major lows. Oversold conditions as the price tests a major support level often indicate a buyable dip within a long-term uptrend phase. What's most important on those previous lows for Royal Caribbean is what happened after the test of the 200-day moving average. In both the August 2024 and October 2023 lows, RCL bounced up above the 50-day moving average while the RSI pushed above the 50 level. This bullish configuration after the low indicated an improving trend and increased momentum, serving to confirm that the recent low was in fact an ideal entry point. Looking at the current price structure, that would mean we need a rally above the 50-day moving average around $238, as well as the RSI pushing above the 50 level to demonstrate improving momentum characteristics. In terms of risk management, it's vital that RCL holds the 200-day moving average. As we've seen recently with many of the Mag7 names and other growth stocks, a break of the 200-day moving average often leads to much further deterioration. We are watching the $200 level to confirm that the 200-day moving average holds. Assuming upside back toward the January 2025 highs, and limiting our downside to the 200-day moving average, we have a fairly attractive risk-reward setup. One final thought is that the volume could provide another way to validate the price action. Despite the pullback in price, the Chaikin Money Flow (CMF) has remained above zero. This volume indicator actually weights the daily volume readings based on where the stock closes relative to the daily high and low. So with the CMF remaining above zero, would infer that investors are accumulating shares despite the broader downtrend since January. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
