From Keith Harwood, OptionHotline.com
As we come into the end of the year, it’s time to really start focusing on what could perform well in the coming year. There’s the traditional “Dogs of the DOW” thesis that recommends rotating out of best performers from the Dow Jones Index and into the ones that performed worst in 2021. And that’s traditionally, worked, but that’s not my focus right now.
Rather, I’m thinking about what happens if we re-open more of the economy. Yes, we had a bit of fear in the market for the last few days over Omicron concerns. But these moves have been getting shorter-and-shorter in terms of longevity.
There are many stocks and sectors that have been hit hard by COVID restrictions, and there’s one sector in particular that I am keying in on as a potential benefactor IF those restrictions start to lift: vacation!
Many people have been desperate to take a vacation after nearly 2 years of restrictions. Many people will still wait but might start booking vacations for 6 months or a year from now, just in case. Either way, that’s potentially positive for many vacation-based stocks.
The 2 main stocks I’m looking at right now are major cruise liners. Cruises are the most obvious vacation destination to NOT buy when a pandemic is going on. I’d think the worst place to be stuck with a fast-spreading virus is on a boat with sick people. But, if we are turning the corner, this can also be a great recovery story – can it really get any worse for cruise liners than it is right now?
Let’s also remember that CCL (Carnival Cruise Lines) just had earnings on Monday. And based upon the report and projections, the stock rallied 5%+. Perhaps we’ve finally seen the investment world saying that really the stock price can’t get any worse.
Let’s look at the charts of CCL and RCL (Royal Caribbean):
As you can see, we seem to be forming a bottom with the stocks making lows on December 1st and now trading above short-term moving averages. This appears to be a pair of potentially interesting “bottom-picking” stocks with some serious upside IF the pandemic keeps getting better.
And if I’m not 100% sure about that specific sub-section of vacation, I can always look a little broader with a stock like EXPE (Expedia). Expedia took a bit of a dip in the last few weeks, but seems to be bottoming as well:
What’s truly unknown here is what’s continuing to be unknown – what happens next with the pandemic? If things get better, there are certainly several stocks that could benefit for 2022 and beyond.
So, please go to http://optionhotline.com to review how I traditionally apply technical signals and probability analysis to my options trades. As always, if you have any questions, never hesitate to reach out.