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Cruising is not so easy

David Becker
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www.iforex.com

The cruising industry has experienced a nice ride during the last 3-months, but choppy seas are ahead as volatility returned to the capital markets. Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) through its subsidiaries, operates as a cruise line operator, offering cruise experiences for travelers with various itineraries in North America, the Mediterranean, the Baltic, Central America, and Bermuda.

The price of the stock has been buoyed by recent upgrades as well as a decline in petroleum prices which allow the cruise line to benefit from lower fixed costs. A stronger stock market has also helped as consumers use discretionary income on vacations.

The 52-week range of NASDAQ:NCLH is $ 24.16 – $35.97, and the stock hit a 52-week high in late December. Earnings increased 36% quarter over quarter. Sales increased 18% quarter over quarter and the three-year growth rate of sales was up 7%. The company has a PE of 28, which is on the high end for this sector, and a profit margin of 7.4%.

There have been insider sales recently that should give investors’ pause as the stock price moves toward resistance levels. Genting Hong Kong a 10% owner of the stock sold 1.6 million shares on December 31, 2013 for a total value of 53 million dollars. Additionally, Apollo advisors (NYSE:APO) another 10% owner of the company sold 1.2 million shares for a total value of 40 million dollars.

The technical picture shows a stock that is poised to test resistance. A failure to break this level would like lead to a quick reversal. Support below the 50-day moving average near $33.00. The accumulation distribution line has not moved higher with price action which means that there is little volume behind the upward movement in price action. Generally strong breakouts are accompanied with robust volume. The recent price action has moved the relative strength index higher up toward 58, which is on the upper end of the neutral range. The MACD is poised to generate a sell signal, which could drive future prices lower.

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