Chart Of The Day: Is Disney's Supply-Demand Shift Signaling An Earnings Surprise?
Investing.com | Nov 05, 2019 06:19AM ET
According to analysts, Walt Disney (NYSE:DIS) is almost certain to stay on trend with this quarter's mega cap earnings recession. The technicals, though, are indicating something curious for a stock that's widely slated to disappoint: the charts are suggesting that demand has overcome supply.
The entertainment giant's stock is expected to fall after its quarterly results are released on Thursday Nov. 7. Profits are seen plunging as much as 35% vs the same period a year ago, as the company's massive investment in 21st Century Fox and significantly increased spending on its new TV-streaming service, Disney+, continue to weigh on its performance.
But, if Disney’s stock is about to tank after the release, why has the its supply-demand balance flipped?
On Sept. 26, the stock completed a H&S top, when it fell below the neckline, the trendline that connects the pattern’s lows. However, the 200 DMA proved a worthy supporter, propelling the price back above the neckline, causing the pattern to blow out.
A pattern failure suggests that the price will be yanked in the opposite direction, like a coiled spring pulled the wrong way. The market mechanics include a short squeeze and traders scrambling to readjust positions in the new "right" direction.
We can see a few things happening at once: the aforementioned support of the 200 DMA bounced prices back above the H&S top neckline (which also escaped a falling wedge pattern, bullish after the preceding rise), a close above the 50 DMA and a new peak in a new short term uptrend.
h2 Trading Strategies/h2Conservative traders should wait for a new peak above the July 29, $147.15 high, to ascertain the uptrend is intact.
Moderate traders may wait for the price to pull back and find support above the wedge and neckline, preferably with a close above the 100 DMA.
Aggressive traders may enter a long position now, after writing out a trading plan that fits their budget.
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