Dow component The Walt Disney Company (DIS) surged to a two-month high on Tuesday evening after beating fiscal first quarter profit estimates by a wide margin and reporting in line revenues. The stock drifted lower during the company's earnings call, reacting to continued challenges at the ESPN network and softness at Shanghai Disneyland, but shares are trading marginally higher ahead of Wednesday's opening bell.
The entertainment giant is expected to roll out its early awaited streaming service later this year but stated before earnings that details won't be disclosed until the April 11 Investor Day. The service could take market share from Netflix, Inc. (NFLX) while underpinning Hulu's growth. Disney's 30% Hulu ownership will rise to 60% following the acquisition of Twenty-First Century Fox, Inc.'s (FOXA) 30% stake later this year.
DIS Long-Term Chart (1990 – 2019)
Disney stock entered a trend advance in the 1980s and continued to gain ground into 1996 when the rally trajectory escalated, more than doubling in price into the May 1998 high at $42.74. Two-sided action then took control, carving a massive double top pattern that broke to the downside following the Sept. 11 attacks in 2001. The shares sold off in two broad waves into the third quarter of 2002, finding support at an eight-year low in the mid-teens.
That marked the lowest low in the next 16 years, ahead of a recovery wave that lost momentum in the upper $20s in 2004. The stock cleared that resistance level two years later, lifting to a seven-year high in the mid-$30s in 2007, ahead of a downturn that accelerated during the 2008 economic collapse. That impulse ended less than two points above the 2002 low, marking a historic buying opportunity, ahead of a recovery wave that completed a round trip into 1998 resistance in 2011.
A 2012 breakout caught fire, adding points at a rapid pace into the third quarter of 2015. Disney posted an-all time high at $122.08 in August and gapped down in the following session in reaction to unexpected weakness at ESPN, which analysts had thought was immune to the cord-cutting phenomenon. Subsequent downside unfolded in two selling waves that reached the upper $80s in February 2016, completing a trading range that hasn't been breached in the past three years.
The stock has carved a massive symmetrical triangle since 2015, with lower highs and higher lows frustrating trend followers. The buying impulse that started in April 2018 continued into November, stalling just two points below the 2015 high, while the decline into December ended at triangle support. The pattern stretched above the red trendline of lower highs in 2018, trapping breakout buyers when it turned south in December.
DIS Short-Term Chart (2017 – 2019)
The stock bounced strongly in the first two weeks of January 2019 and stalled around $113, just below this morning's pre-market action. The failure to hold gains following earnings suggests limited buying power that keeps the stock range bound for now, while potential investors await details about the streaming service and Fox acquisitions. The 200-day exponential moving average (EMA) at $110 now marks the dividing line between bull and bear control, so that's the level to watch if the stock sells off in the coming sessions.
The on-balance volume (OBV) accumulation-distribution indicator topped out in 2015 and entered a distribution phase that ended in the fourth quarter of 2016. It has stair-stepped higher in the past two years but still hasn't reached the prior peak. The indicator has ground sideways since August 2018 and could offer early directional clues, with an uptick favoring a test at multi-year resistance while a downturn raises the odds for another trip into triangle support.
The Bottom Line
Disney stock is trading marginally higher after an upbeat earnings report, predicting that the multi-year trading range will continue into the foreseeable future.
Disclosure: The author held shares of Disney in a family account at the time of publication.