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Buy the Dip in Disney? The Charts May Not Agree

Disney went 0-for-3 on its top earnings metrics and is paying the price. Do investors buy the dip? Let's look at the chart.

It’s not a good day for the House of Mouse, with Disney  (DIS) - Get Walt Disney Company Report stock down more than 6% on Thursday.

On the plus side, it’s well off the session low when shares were down more than 9% on the day.

While it’s not exactly a bullish reaction to earnings — the stock is down on the day after all —  the losses aren’t too bad and bulls are buying the dip.

That’s about as much as investors could ask for in a situation where a company misses on earnings and revenue expectations and as Disney came up short on subscriber estimates.

It’s not as bad as the decline in Paysafe  (PSFE) - Get PAYSAFE LTD Report, but Disney is still one of today’s notable decliners.

It’s a pretty simple situation, really. The company missed on the key estimates for its business and its stock is declining as a result. It’s not cratering, but the charts aren’t exactly bullish.

Irrespective of the charts though, there is certainly an investment argument to be made here. I’ll leave that to Real Money’s Stephen “Sarge” Guilfoyle, though.

Let’s look at the charts.

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Trading Disney Stock

Daily chart of Disney stock.

Daily chart of Disney stock.

The stock rallied hard off its January low and topped in March just above $200. Since then, we’ve seen several lower highs, but more recently, the stock had settled into a trading range.

Specifically, that range was defined by support near $170 and resistance between $187.50 and $190.

In September, Disney lost its 200-day moving average, which then became resistance along with the $178 to $180 area. As for today’s action, it’s a pretty mixed bag.

There is some really nice divergence on the Williams %R reading at the bottom of the chart. Further, Disney stock is reversing nicely off the $160.50 level.

That said, it still remains below all of its daily moving averages and broke below its range support. 

Additionally, it didn’t quite give us a gap-fill to $157.46 — although if today’s action marks the low, most traders will consider that to be close enough.

On the upside, I would really like to see how Disney handles the $169 to $170 area and 10-day moving average. Above both measures puts a full earnings gap-fill move in play to about $174.

On the downside, a drop below $160.50 puts today’s low in play along with $157.46. Below all of these levels could put the 21-month moving average on the table.