Just as TheStreet’s Jim Cramer had said, no matter what the reviews implied, "Star Wars" would be a blockbuster success. As it knocks on the $1 billion global box office mark, that’s certainly the case.
While shares of Disney started off higher in premarket trading, they have since slipped about 1% in Monday’s trading session. Perhaps that’s due to less-than-stellar NBA ratings or maybe it’s because the rest of the broader market is under notable pressure for the first time in weeks.
In either case, it’s caught the attention of the Real Money team, who named Disney as the Stock of the Day.
With that in mind, let’s take a look at the charts.
Trading Disney Stock
Since hitting a high of $152.50 in late November, Disney stock has been putting in a series of lower highs. This downtrend resistance mark (blue line) has been squeezing shares lower against a static level of support, near $144.
This setup - where downtrend resistance squeezes a stock down into support - is typically a bearish technical development known as a descending triangle. However, some traders aren’t viewing Disney with the typical bearish bias amid this setup.
Instead, many are looking at Disney as a sort of bull flag pattern, which is a consolidation pattern following a noteworthy rally. Given the powerful move we saw in November - where shares rallied from $130 to $150 in just a few days - it’s hard to fault a bullish bias here, especially with the stock holding up over its 50-day and 200-day moving averages. So what should traders do?
Those who are bullish can consider a partial position now and add to it should Disney stock break out over downtrend resistance and the 20-day moving average. On a drop below the 50-day moving average - which also drops shares below current support and the 78.6% retracement - they can stop out of their partial position for minimal losses.
Those who are bearish on Disney can take the opposite approach. They can short the stock and look for a breakdown below current support. Below the 50-day and the selling pressure could increase. Bears can use a buy-to-cover stop-loss on a move over the 20-day moving average and downtrend resistance.
This two-pronged approach gives both bulls and bears a trade in Disney, which is atypical. Of course, the third option is to wait and see which development occurs first, either a break of support or resistance, and trade Disney from there.