Shares of Walt Disney Co (NYSE:DIS) are lower by nearly 3% for the year on the back of a series of sell-offs in recent months. As a result, DIS stock now rests on a thin layer of technical support where traders and active investors will find two possible ways to trade the stock.
Before looking at today’s trade idea, let me reiterate that we currently find ourselves in a choppy environment in stocks. The month of August tends to be a difficult month for traders, as stocks usually chop back and forth. Thus far, August has brought about plenty of chop and some volatility, thus living up to the August standards. The following trade idea in DIS stock plays perfectly into this choppy August environment.
DIS Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
For a little perspective, let’s note that while DIS stock through the longer-term lens remains in a decisive up-trend, it has found itself in a consolidation phase since the summer of 2015. The most recent selling pressure now has the stock sitting right atop the multiyear support line (purple-dotted line).
A break below there from this angle could mean that the next stop is closer to the red 200 week moving average currently residing around the $97 area, or approximately 4% lower from Thursday’s closing prices.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart note that after DIS stock topped out in late April of this year, an important lower high followed in early August, where the stock also roughly began to reject its blue 100-day moving average. Finally, on Aug. 9 the stock gapped lower following the latest earnings results, which also broke the stock back below its 50- and 200-day moving averages.
Such down-gaps often times are telling and also offer traders well-defined opportunities. Either DIS stock soon attempts a bounce and begins to fill the Aug. 9 down-gap back up to the $106 area, or we soon see continuation selling.
Specifically, a push and hold above $103 on a daily closing basis could set up the bull case bounce trade into $106. Alternatively and considering the bigger picture weight on the stock arguably the higher probability trade is that DIS breaks and holds below the $100.50 area, which would set up a first downside target near $97-$95.
Check out Anthony Mirhaydari’s Daily Market Outlook for Aug. 18.
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