Viacom Carriage Deal May Entertain Bounce in Entertainment Stocks

Viacom's contract with AT&T prevents a channel blackout

Shares in entertainment and media giant Viacom Inc. (VIAB) jumped as much as 8% in Monday's trading session to post their largest one-day intraday gain in seven months before settling 3.87% higher at the close of trade. The much needed share price boost came after the company ended a week-long spat with AT&T Inc. (T) subsidiary DirecTV over fees paid to carry its content.

"We are pleased to announce a renewed Viacom-AT&T contract that includes continued carriage of Viacom services across multiple AT&T platforms and products," the companies said in a joint statement, per USA Today. Viacom stock had come under intense selling pressure last week amid fears that the dispute could result in a blackout of 23 channels if not resolved by Friday, March 22, and that AT&T had the upper hand in the negotiations.

From a technical standpoint, shares of Viacom and the two other entertainment heavyweights discussed below sit at crucial support levels that offer swing traders an opportunity worth entertaining. Let's take a closer look at each issue.

Viacom Inc. (VIAB)

Viacom operates two business segments – Media Networks and Filmed Entertainment. Flagship brands across its portfolios include Nickelodeon, MTV and Paramount Pictures. The New York-based company distributes its content through television, digital platforms and mobile apps. Viacom has beat analysts' earnings estimates over the past four consecutive quarters, and the stock received an upgrade from Pivotal Research from "hold" to "buy" in mid-January. Viacom stock has a market capitalization of $10.88 billion and is up just 3.19% year to date (YTD), underperforming the industry average by 14.34% over the same period as of March 26, 2019. Despite the stock's dismal return, a 3.16% dividend yield keeps income investors happy.

Viacom shares sold off sharply over the past week toward support at $25 as investors grew fearful that the company wouldn't be able to renew an equitable distribution contract by the midnight deadline on March 22. Traders jumped back into the stock yesterday on above-average volume, indicating relief that the companies finalized a carriage deal over the weekend. Traders who buy here should book profits on a move to $30.65 – an area the price may find resistance from a horizontal line that stretches back over the past 12 months. Consider placing a stop-loss order beneath this month's swing low.

Chart depicting the share price of Viacom Inc. (VIAB)

Comcast Corporation (CMCSA)

NBCUniversal parent Comcast Corporation (CMCSA) is an entertainment, media, technology and telecommunications company all in one. Its cable operations provide up to 58 million homes and businesses across the United States with internet, television and phone services. The company's popular cable networks include business news channel CNBC, MSNBC and USA. In 2018, Comcast, which trades at a respectable 15.6 times earnings, purchased U.K. satellite broadcaster Sky Limited for $39 billion to extend its media empire into Europe. More recently, the company announced that it's spending $50 million to create the world's first video gamer arena in downtown Philadelphia, per Bloomberg. With a market value of $177.33 billion and offering a 2.10% dividend, the stock has risen over 15% for the year, making it the best performer of the three issues discussed as of March 26, 2019.

After bottoming at $32.43 on Dec. 26, Comcast shares have staged a remarkable recovery to hit a new 52-week high this month at $40.52 – a rise of nearly 25%. The stock's recent decline to the 15-day simple moving average (SMA), a three-month trendline and the November swing high provide traders with a high-probability entry point. Those who open a long position could use the 15-day SMA as a trailing stop to capture as much of the uptrend as possible. Traders may want to wait for a reversal candlestick to form, such as a bullish engulfing pattern or hammer, before committing capital. A close below $38 invalidates this momentum setup.

Chart depicting the share price of Comcast Corporation (CMCSA)

The Walt Disney Company (DIS)

Founded in 1923, The Walt Disney Company (DIS) is a diversified entertainment conglomerate. The company owns cable television channels, produces films and TV shows, and operates arguably the world's most recognized theme parks and resorts. Disney completed a $71 billion acquisition of Rupert Murdoch's 21st Century Fox on March 20, 2019, to help successfully compete with rivals Netflix, Inc. (NFLX) and, Inc. (AMZN). The deal brings the likes of "X-Men," "The Simpsons" and "Fantastic Four" characters to Disney's already impressive television and film lineup. Disney stock, with a $195.65 billion market cap and yielding 1.63%, is down 1.70% so far this year as of March 26, 2019.

Traders have taken profits in Disney over the past six trading sessions as the company cemented the Fox acquisition. The pullback now places Disney shares just below $108, where the price finds crucial support from a trendline connecting the June swing high and September swing low. Volume has declined each day in the recent downturn, suggesting abating selling pressure. Those who buy the dip should set a price target at $116 resistance and think about positioning a stop under the January low at $105.94. Like in the case of Comcast, traders may want to wait for a reversal in price action to confirm that upward momentum has resumed.

Chart depicting the share price of The Walt Disney Company (DIS)
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