Mergers and acquisitions have driven some serious technical activity in the media sector over the last few days as Disney and Snapchat are a few of the companies throwing some potential deals out on the table. The implications are strong for a few companies, but the danger of getting sucked into a sell the strength situation is also strong.
Today’s three big stock charts look at the charts for Twenty-First Century Fox Inc (NASDAQ: FOXA), Walt Disney Co (NYSE:DIS) and Snap Inc (NYSE:SNAP) as all three companies have some form of M&A affecting share prices. The charts tell us which are buys and which are sells.
Twenty-First Century Fox Inc (FOXA)
Shares of FOXA are continuing to surge higher as the company suggests that it will make changes to their news organization to move the merger with Sky forward. The company will report earnings after the close today, which may pressure Twenty-First Century Fox over the short-term.
Are FOXA shares a buy ahead of earnings tonight?
- FOXA shares stalled at their top Bollinger Band yesterday, missing the opportunity to move into a potential volatility rally. The stock made a similar move in October ahead of a significant decline.
- The 200-day moving average is overhead, ready to provide resistance at $28 while the stock’s 50 day moving average is trending lower. I expect to see some support at $26 from the 50-day; however, that trendline is currently in a neutral pattern, meaning that support for Twenty-First Century Fox may be thin.
- Finally, from a long-term perspective, FOXA shares are trading at their 20-month moving average. This stock has been in a bear market since August after breaking through this trendline. In addition, the faster moving 10-month average is preparing to cross below the 20-month, magnifying the bearish outlook.
Walt Disney Co (DIS)
DIS will reporting earnings results after the close on Thursday. The market and analysts will be looking at the numbers for ESPN and other business lines that have been taking the bottom line lower. Disney shares are also being affected by the news that the potential FOXA deal is off. The long-term technicals have some say on whether Disney is a buy here.
- Like FOXA shares, DIS stock has been trading in a bear market since September after it moved below its 20-month moving average. The stock is trying to break back into bull market territory with a move above $102. Such a move will start to attract technical buyers, though resistance will lie at $106.
- Disney broke into a volatility rally on Monday as it moves above the top Bollinger Band. Historically, these rallies last two to three weeks and run an average of 7%. This puts the current rally on a course to $106, which would be a convenient test of DIS stock’s 200-day moving average. A move above this trendline would target a rally to $111.
- I love the fact that momentum is building in shares of Disney as the 20-month is being challenged and a volatility rally is under way. Readings of the Chande Trend Meter just went bullish last week. This increases the odds that DIS makes a run to that $111 target over the next four weeks.
Snap Inc (SNAP)
SNAP stock is moving higher in the premarket after losing more than 20% in after hours trading last night following a terrible earnings report. The company is bouncing due to the news that Tencent Holdings Ltd (OTCMKTS:TCEHY) has increased its position in the company to roughly 12%.
Should you follow its lead and grab Snap Inc on the dip, which never seems to end?
- Despite the positive news of Tencent’s investment, SNAP shares are breaking into a new volatility sell-off that is going to target $12 before the stock finds support.
- The Chande Trend Meter for SNAP shares has maintained a bearish outlook on the stock. This combined with the RSI readings, which are far from showing oversold readings, imply that the stock is likely to move fast and aggressively to the downside.
- A break below the $13 level will bring another spate of volatility selling as it did in August as investors, not traders, look at the stock as a long-term sell and exit positions. Bottom line is that a real buyout of SNAP is the only driver that should help the technical picture for the stock.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.