The daily and weekly stock charts for The Walt Disney Company (DIS) suggest that a positive reaction to earnings may be factored into the stock price given the spike higher between April 12 and its all-time intraday high of $142.37 set on April 29.
The stock closed Tuesday, May 7, at $33.44, up 21.7% year to date and in bull market territory at 35.4% above its May 4, 2018, low of $98.58. The stock is 6.3% below its all-time high. Disney is a component of the Dow Jones Industrial Average, which is up 11.3% year to date and 19.6% above its Dec. 26 low of 21,712.53.
Analysts expect Disney to post earnings per share of $1.59 when it reports results after the closing bell on Wednesday, May 8. On Tuesday, BMO Capital Markets raised its price target for Disney shares from $135 to $170 as the company becomes a leader in content streaming. BMO is also positive on the opening of "Star Wars" themed parks between the end of May and November. My call is that the positives are factored in if Disney shares stay below my annual pivot at $138.93. Disney has a P/E ratio of 19.20 with a dividend yield of $1.30, according to Macrotrends.
The daily chart for Disney
The daily chart shows that the stock has been above a "golden cross" since July 16, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices lie ahead. The stock closed at $110.20 on July 16, and this signal survived close calls in February into April.
The close of $109.65 on Dec. 31 was an input to my proprietary analytics, and semiannual and annual pivots remain at $118.93 and $138.93, respectively. The close of $111.03 on March 29 was another input into my analytics, generating a quarterly value level of $101.33. The close of $136.97 on April 30 was also an input, which resulted in a monthly pivot at $134.92.
The weekly chart for Disney
The weekly chart for Disney is positive but overbought, with the stock above its five-week modified moving average of $127.71. The stock also is above its 200-week simple moving average, or "reversion to the mean," at $106.05, which was a buy level as 2019 began. The 12 x 3 x 3 weekly slow stochastic reading is expected to end this week at 85.66, slipping from 86.61 on May 3. Both levels are well above the overbought threshold of 80.00.
Trading strategy: Buy Disney stock on weakness to its semiannual value level at $118.93 and reduce holdings on strength to its annual risky level of $138.93. Remember that there is a monthly pivot at $134.92.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February, March and April. The quarterly level was changed at the end of March.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.