Beware of Airlines and Cruise Ship Stocks

Since falling to multi-year lows, airline stocks like Delta Airlines (NYSE:DAL) and American Airlines (NASDAQ:AAL) formed a steady uptrend. Those stocks could break down at any time and face selling pressure.

The airline recovery depends on a multitude of factors. COVID-19 cases rising around the world, due to schools reopening and looser restrictions, threaten to increase border closures.

If governments around the world re-implement partial or full shutdowns, airline travel will weaken further. International airline volumes are already weak. The infection rate spike will only delay its rebound.

Domestic flights are still sensitive to health data. For now, daily traveler throughput is climbing steadily. So, risks of a liquidity crunch are low for now and investors will still bet on the sector.

The cruise line investing bet came to an end last week. Cruise cancellations until 2021 will undermine the near-term rebound play in stocks like Carnival (NYSE:CCL) and Royal Caribbean (NYSE:RCL).

Voyagers willing to take a cruise will have to wait longer. And with each passing week, that ship departures are delayed, cash flow concerns will mount. CCL and RCL shares may face selling pressure as investors unwind the rebound bet.