Upgrades and earnings are providing some catalysts for movement at the stock level for is what is otherwise turning into a boring market. This morning’s headlines include earnings for Walt Disney Co (NYSE:DIS) and Yelp Inc. (NYSE:YELP) along with some hangover trading continuing to pressure on Wayfair Inc (NYSE:W) after their earnings earlier this week.
In all of these cases there is some upside potential for each stock, just more for one and less for the others.
Walt Disney Co (DIS)
Disney shares were trading lower by 1.5% ahead of the open after their less-than-stellar earnings results, which were announced after the close. The stock has since started to climb.
The company also announced the acquisition of a minority stake in the BAM Network, a company that streams MLB games.
Shares of the media/entertainment company have been trading in a range that has had support at $96. This support has been lent to the shares clearly by the charts, as there are no trendlines that correlate with that price at this time. Disney shares posted daily bottoms ahead of short-term rallies in April and June at $96.
From the long-term perspective, Disney shares are sitting right at the bottom Bollinger Band on a monthly chart dating back to 2011 when the stock set into rally mode. Just overhead of current prices are the declining 50- and 200-day moving averages, which have been pressuring Disney stock.
The charts suggests that Disney will probably see a short-term bounce that could set the stock towards $100, but that the long-term investors have been selling into strength, putting critical support at $96 at risk.
Yelp Inc (YELP)
On the other side of the earnings coin is Yelp. The company’s earnings report came in better than expected, shooting the stock higher in premarket trading by more than 14%.
Yelp shares have been in a strong intermediate-term rally since bottoming in April. The rally has been fueled by positive earnings and a renewed interest in the stock after years of struggling fundamentals. Since breaking back above their 50-day moving average in April, the shares have held a tight, tradable trend that has built strength and momentum, putting the stock back on the radar of traders and investors.
Shares just moved into a long-term bull market patter in breaking back above their 20-month moving average this month. Today’s news is going to get some analyst attention and start to bring some upgrades, which should drive prices higher.
Traders should watch for a little selling pressure as short-term traders of the stock will take some profits off the table, but that should be offset by the improved long-term trend and support at $31.75.
Wayfair Inc (W)
Wayfair spent the last two weeks rallying HARD into their earnings announcement as the stock experienced a “buy the rumor” rally, mentioned last week in this space. The company has now suffered the “sell the news” reality now as the earnings report didn’t muster-up to expectations.
Looking at the chart, not all is lost on Wayfair for now. The post-earnings selling landed shares back at the $40 level, which has been strong due to the consolidation that has been building there since May. The bottom of the range for that consolidation has been $37.50, which has also been the site of large levels of put open interest, which often helps support shares.
At $38.80, Wayfair still has some downside risk to the $37.50 level, but it is clear that this stock is in the hands of the traders, not necessarily investors right now. The charts signal an oversold condition at these prices, which will signal a short-term bullish opportunity for traders to potentially step back in and post a short-term tradable bottom to at least the median of the consolidation range ($40).
As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.
