It has not been smooth sailing for the cruise operators. While the market is enduring a correction, at least most names enjoyed a run back to new highs. Or at the very least, a push above the pre-coronavirus 2020 highs. Not Carnival (NYSE:CCL), though. In fact, CCL stock has barely recovered half its losses from its 2020 high.

The stock still remains 52% below its high from before the pandemic hit. In a way, we should be sympathetic to the company’s situation. Who could have known the world was going to shut down in the manner that it did? 

Admittedly, China is an enormously populated, busy economic powerhouse. So an outbreak in this region should have likely had Carnival, Royal Caribbean (NYSE:RCL) and Norwegian Cruise Line (NYSE:NCLH) a bit more prepared for a worst-case scenario. Heck, it should have had the whole world in a better-prepared situation. 

Alas though, that wasn’t the case and now bulls are wondering if CCL stock and its peers can ever recover.

Breaking Down Carnival

I would bet that not all investors realize just how bad the pandemic hit Carnival. At the top of the story, I pointed out that many stocks rallied shortly after the March 2020 low. But that’s because business quickly rebounded for many of these companies. For some, revenues exploded higher. 

For Carnival, revenue sank — and it stayed down. 

The company reported five straight quarters where revenue declined more than 85% year over year. Three of those quarters had sales declines of more than 99% year over year. That is stunning!

So, what does a company do that experiences a near-immediate halt to the top of its income statement? Well, it must raise funds. 

In some cases that’s with debt, in other cases it’s with stock sales. For CCL stock, it’s both. Carnival came into 2020 (pre-pandemic) with about $11.5 billion in total debt. As of the most recent quarter, that figure stood at $32.6 billion, a nearly three-fold increase. 

In February, the company had about 700 million shares outstanding versus 1.166 billion at last count. That’s an increase of more than 66% and shows just how dilutive raising capital can be. 

But what other choice did Carnival have? 

Analysts expect $2.2 billion in sales this year and a loss of more than $5 per share. Considering that Carnival did $5.6 billion in sales in 2020 — shocking — and more than $20 billion in sales in 2019, $2.2 billion is just a few drops in the bucket. 

However, 2022 should be better. Analysts expect breakeven operations on $15.4 billion in sales.

Sailing With Covid

Norwegian recently said it should have 75% of its ships sailing by January and all of them back in action by April. Carnival plans to have 90% of its ships sailing by February. So, there is optimism in the industry. The problem is Covid and how much more havoc it’s going to cause. 

Will the Delta variant gain momentum? Will the fall and winter seasons drive up case counts? Will another variant emerge? 

These are all important questions that could impact tourism. 

But so are the positive questions. With more than 75% of U.S. adults receiving at least one shot of the vaccine, will it allow case count growth (and more importantly, death counts) to slow? Will new treatments — like Merck’s (NYSE:MRK) oral application — help slow the impact? Will vaccine “passports” allow a return to sailing even if case counts are on the rise? 

We don’t have answers to these questions, but they are what we have to consider with CCL stock and its peers.

Trading CCL Stock

The chart is pretty complicated, littered with retracement levels and moving averages. However, the weekly chart gives a good snapshot of CCL stock — and the levels aren’t as complex as they seem. 

Notice how the stock has been bouncing between these key retracement levels. The 38.2% retracement was resistance in Q2 2020 and Q4 2020. Then it was support through the first six months of this year, then resistance again in Q3. 

Now back above it, bulls want to see CCL stock maintain above the 38.2% retracement (at $24.66). This level also comes into play near a bevy of daily and weekly moving averages and VWAP measures. 

To lose $23.50 is to lose all of these marks as support. That puts uptrend support in play, followed by the $20 level. 

On the upside, let’s see if CCL stock can climb to the $29.50 to $31.50 area. This stock will need to the technicals to behave well, because even though business should be coming back strong, Carnival has a lot to prove as concerns still swirl. 

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.