The tech-led rally is still running. The Nasdaq closed at a record high yesterday, the S&P 500 is knocking on the door of its own all-time high this morning, and oil is easing back below $100 a barrel while Treasury yields pull back from multi-decade highs. In a risk-on tape like this, I want to find the beaten-down sectors starting to show signs of life.
One of those is the cruise lines, and the best setup I’m seeing in the group is Carnival (CCL). The stock jumped about 13% on September 29th after the company beat estimates, raised its full-year outlook, and reported record bookings for 2027. What I like even more is what has happened since. Instead of fading, shares have kept climbing, and that’s the follow-through I look for after a big earnings gap.
Here’s the chart for CCL:
Stocks that gap higher on strong earnings and guidance tend to keep drifting in that direction for weeks as analysts raise targets and money managers that missed the first move chase the stock. CCL checks those boxes. It was sitting near its 52-week lows before the report, and analysts have been lifting price targets since the numbers came out. When a beaten-down stock gets a catalyst like that, the move usually isn’t over after one day.
I ran CCL through the Stock Forecast Toolbox (Try it out for free!) to see how far this could go:
The model is projecting a move to north of $32, which would put CCL back toward the top of its yearly range. That’s a big move, and it’s why I’m looking at an outright call rather than a spread today.
The November 20th $28 call is currently priced at about $0.80. If CCL gets to $32 or higher, that call would be worth over $4.00, a potential return of 400% or more on a small amount of capital. That’s the leverage you get from a cheap, out-of-the-money call on a stock with real momentum, and the late November expiration gives the post-earnings drift plenty of time to play out.
The flip side of that leverage is that an outright call can lose its full value if CCL stalls below $28, so I keep the position size small and plan to take profits on the way up. I wouldn’t count on every dollar of that $4.00, but even a partial move toward the target could produce a very strong return.
Make sure to take advantage of the free 7-Day Trial of the Stock Forecast Toolbox so you can see what it can do for you!
If you have any questions, never hesitate to reach out.
Keith Harwood
Keith@OptionHotline.com
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