The Walt Disney Company (DIS) released two consecutive better-than-expected quarterly earnings reports on Feb. 6 and May 8, and the stock has been slowly climbing its 200-week simple moving average since the week of Sept. 8, 2017. This "reversion to the mean" is now at $102.49. This is a longer-term indication that Disney stock may be losing its mantra as being dead money.
Disney shares closed Friday, June 8, at $103.98, down 3.3% year to date and 8.1% below the 2018 high of $113.19 set on Jan. 3. The stock is up 6.4% since it set its 2018 low of $97.68 on May 3.
Disney has been disappointing investors since setting its all-time intraday high of $122.08 back on Aug. 4, 2015. This report was the first that showed warnings for its ESPN franchise. Helping the Mouse House now is Disney's planned deal to acquire significant assets from Twenty-First Century Fox, Inc. (FOXA). The potential deal does not include Fox Sports or Fox Broadcasting. (See also: Can Disney Spend its Way to Content Dominance?)
The daily chart for Disney
The daily chart shows the choppy random trading pattern that Disney has been in over the past 52 weeks. My weekly value level of $101.40 is the horizontal at the bottom of the chart. The volatility of the stock makes the 50-day and 200-day simple moving averages of $101.16 and $103.10, respectively, not accurate when it comes to a "golden cross" or a "death cross." It's more important to note that the stock is between two horizontal lines that represent my quarterly and monthly pivots of $105.47 and $106.25, respectively,
The weekly chart for Disney
The weekly chart for Disney is positive, with the stock above its five-week modified moving average of $101.98. The stock is also above its 200-week simple moving average, or "reversion to the mean," now at $102.49. Disney has been moving higher tracking this moving average since the week of Sept. 8, when the average was $97.76. Note the downtrend that connects the weekly highs going back to the all-time high of $122.08 set during the week of Aug. 7, 2015. This trend comes in at $112.35 this week. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 41.66, up from 36.54 on June 1.
Given these charts and analysis, my trading strategy is to buy Disney shares on weakness to my weekly value level of $101.40 and reduce holdings on strength to the downtrend resistance of $112.35. My quarterly and monthly pivots are in between at $105.47 and $106.25, respectively. (For more, see: Peering Into the New Communications Services Sector.)