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Trade of the Day: Is It Time to Nab Disney Stock As It Points Lower?

DIS stock is at a critical juncture and setting up for a promising trade

Disney (NYSE:DIS) stock is still higher by about 25% year-to-date. For the past four months or so, however, DIS stock has largely been consolidating and it increasingly looks like this consolidation phase could lead to a break lower for a trade.

Trade of the Day: Is It Time to Nab Disney Stock As It Points Lower?
Source: ilikeyellow / Shutterstock.com

From a headline perspective this year, DIS stock has been primarily driven by news around the company’s upcoming subscription video on-demand service. And given this recent sensitivity to such headlines, the next batch of news — whether positive or negative — could severely affect the stock again and possibly push it out of a multi-month trading range.

DIS Stock Charts

DIS Stock Charts
Source: Charts by TradingView

Looking at the multi-year weekly chart of Disney stock we see that in April the stock staged a notable breakout move that pushed it out of a multi-year consolidation pattern.

While this move should be bullish through an intermediate-term lens, it is noteworthy that the stock’s year-to-date performance is largely the result of a two-week rally that the stock staged in April. In other words, aside from this two-week rally, Disney stock has largely moved sideways in 2019 so far.

The latest consolidation phase in the stock since the April highs has developed a head-and-shoulders pattern, which if triggered leaves plenty of downside room for the stock. In fact, technically speaking, if this pattern triggers, DIS stock could re-test its previous breakout area in the high $110’s. To be clear, this is not my base case, but I did want to highlight this as a possibility through a pure technical lens.

Disney stock daily chart
Source: Charts by TradingView

On the daily chart we see that Disney stock on Sept. 9 found technical resistance at former support (purple line), which currently also coincides with the yellow 50-day simple moving average. Furthermore, on Sept. 10 we saw follow-through selling and my proprietary B2 bearish reversal signal triggered.

Active investors and traders could short DIS stock around the $136 area, using a well-defined stop loss at $140 and a next downside target at $130. Alternatively one could buy the November 135-130 bear put spread.

My favorite way to look for entry points to short DIS stock at this juncture is using a specific candlestick pattern. Join me on Saturday Sept. 14 for a special webinar for InvestorPlace readers, where I will teach this high-probability candlestick pattern.

Join Serge’s special webinar to InvestorPlace readers where he will teach his highest probability candlestick pattern for rapid bullish and bearish reversals.

Article printed from InvestorPlace Media, https://investorplace.com/2019/09/trade-of-the-day-is-it-time-to-nab-disney-dis-stock-as-it-points-lower/.

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