Trade of the Day: Walt Disney Co (DIS) Stock Primed for a Pullback

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EDITOR’S NOTE: Sam Collins will return on Feb. 21.

Walt Disney Co (NYSE:DIS) has been among the strongest Dow Jones Industrial Average stocks during the post-election rally — shaking off recent worries about cable subscribers and its ESPN business — posting an impressive 22% rise from its October low into the high set earlier this month.

But Disney shares look vulnerable now to a post-earnings pullback on profit taking, which would take the stock below its 20-day moving average and break the multimonth uptrend.

I’m targeting a drop to the $105 area, which represents support from the DIS 50-day moving average and the high from last May.

Trade of the Day: Walt Disney Co (DIS) Stock Primed for a Pullback

Analysts are looking for earnings of $1.49 per share in DIS stock on revenues of $15.3 billion. Analyst sentiment has been mixed lately, with a batch of both upgrades and downgrades. Even the media doesn’t know what to think, with Barron’s featuring a positive view on the company back in January but the Wall Street Journal out with a cautious note ahead of Tuesday’s numbers.

Back in November, the stock climbed despite reporting a Q4 earnings miss as forward commentary calmed nerves. A lot of positive expectations have now been priced into the stock — setting up a “sell the news” dynamic that should push shares lower and delight any shorts.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.

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