The Walt Disney Company (DIS) stock set its all-time high of $122.08 during the week of Aug. 7, 2005, and then had a 29.3% bear market decline to as low as $86.25 during the week of Feb. 12, 2016. The culprit for this decline was increasing costs of its sports networks under the ESPN banner. It took nearly three years to stabilize this situation as customers continued to cut the cable TV cord in favor of its new ESPN+ streaming service.
Disney shares have been moving sideways, and during the week of Sept. 8, 2017, the stock finally tested its "reversion to the mean," then at $97.76. This is when shares of Disney returned to be a favored longer-term portfolio holding. The stock closed Wednesday, Nov. 7, at $117.05, up 8.9% year to date and up 19.8% since setting its 2018 low of $97.70 on April 3. The stock set its 2018 high of $119.69, so it's knocking on the door of a new all-time high with a positive reaction to earnings.
Disney reports earnings after the closing bell on Thursday, Nov. 8, and analysts expect the media giant to disclose earnings per share between $1.31 and $1.33. Disney's ESPN+ streaming service is gaining traction, surpassing the one million mark in paying subscribers. Given the stronger economy, investors should also look for significant growth in attendance at theme parks around the world.
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 lay ahead. This led to the 2018 high of $119.69 set on Oct. 22. The horizontal line is my monthly value level for November at $114.00.
The weekly chart for Disney
The weekly chart for Disney will become positive if the stock breaks out above my quarterly and semiannual risky levels at $122.49 and $122.89 on a positive reaction to earnings. The stock is above its five-week modified moving average of $114.57. The stock is also above its 200-week simple moving average, or "reversion to the mean," now at $104.84. At issue is that, without a breakout, the 12 x 3 x 3 weekly slow stochastic reading is expected to slip to 63.66 this week, down from 65.35 on Nov. 2.
Given these charts and analysis, my trading strategy is to buy Disney shares on weakness to my monthly value level of $114.00 and reduce holdings on strength to my annual risky level of $127.69.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.