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Here's the Trade on Disney Stock After Earnings Rally

Disney stock is popping higher on earnings but it's not out of the woods yet. Here's how to trade the stock from here.

There’s a bit of magic left for Walt Disney  (DIS) - Get Free Report after all, with shares up about 3.5% on Friday following earnings.

Friday’s gains were less than the after-hours gain we saw on Thursday, but either way bulls are celebrating the results.

The company beat earnings and revenue expectations with a strong rebound in its parks business, while the overall streaming business did better than expected.

Specifically, Disney+ subscribers came in at an impressive 116 million.

Disney’s post-earnings reaction was reviving the bulls’ thesis for more upside as its businesses all start to click.

Obviously, COVID-19 still presents a massive risk to Disney, but it weathered the storm pretty well.

The post-earnings pop also has the attention of some of our Real Money contributors. Let’s look at the charts.

Trading Disney Stock

Daily chart of Disney stock.

Daily chart of Disney stock.

For most of 2021, Disney stock has been consolidating. In early March, the stock was able to push through the $200 level, but that rally quickly fizzled out.

Shares bottomed near $167 and bounced back above $170, which became support until the 200-day moving average gave the stock a boost earlier this month.

Ahead of earnings, Disney was also able to reclaim its 10-day, 21-day and 50-day moving averages.

Now gapping higher, shares are sitting at an interesting juncture.

Specifically, the stock is trying to rotate over last month’s high at $186.29. If Disney stock can give bulls a monthly-up rotation, it could quickly put the 61.8% retracement in play at $189.30.

That $190 area was resistance in April and May. To clear the July high and this level would open the stock up to a test of the $200 area and the all-time high near $203.

For longer-term investors, clearing the prior high could eventually put the $225 level on the table. Near that area, Disney stock will find the 161.8% extension from the current range.

If Disney can’t reclaim the July high and loses Friday’s low, shares could trade down and fill the gap near $180, as well as test the 10-day moving average.

The post-earnings reaction is bullish, but until Disney can rotate higher, it may remain in a consolidation pattern. Keep an eye on the July high, then $190.