The Walt Disney Company operates as an entertainment company worldwide. The company operates broadcast and cable television networks, domestic television stations, and radio networks and stations. Its cable networks include ESPN, Disney Channels, and ABC Family, as well as UTV/Bindass and Hungama. It also owns and operates the Walt Disney World Resort in Florida, Disneyland Resort in California; Disney Resort & Spa in Hawaii; Disney Vacation Club, Disney Cruise Line, and Adventures by Disney; and Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort, as well as licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan. Further, it produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings, and live stage plays; licenses trade names, characters, and visual and literary properties to retailers and publishers; publishes entertainment and educational books, magazines, and comic books; and operates English language learning centers in China.
Take a look at the 1-year chart of Disney (NYSE: DIS) below with my added notations:
Since its November peak, DIS seems to have formed a trend line of resistance (red) after being tested a 3rd time yesterday. Any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. The DIS trendline of resistance currently sits right around $100-01. A break above that line should mean higher prices, overall, for the stock.
On top of that, DIS also has a key price level at $100 (green), which the stock has recently broken above, that should now act as support. At some point, either the key level of $100 or the down trendline of resistance will have to break.
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The Tale of the Tape: DIS is currently stuck between a down trending resistance and a key level of support at $100. A break above that resistance should mean higher prices for the stock, thus a long trade could be made. Short traders might look to enter a trade at the resistance or on a break of $100.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach