How to Trade Disney After Strong Earnings and Streaming Momentum

Disney hit new highs, then retreated despite robust streaming results and solid earnings. Let's look at the chart.
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Walt Disney  (DIS) - Get Report temporarily hit a new all-time high on Friday after the company reported earnings and the better-than-expected results were overshadowed by the company’s streaming efforts.

While a top- and bottom-line beat was certainly good news for investors, the momentum that Disney has garnered in streaming is what’s most impressing its shareholders.

Disney+ now has 94.9 million subscribers, which beat expectations of 90.7 million. Remember, this platform launched in November 2019. So the fact that it’s on the verge of 100 million subscribers in just more than a year is mind-boggling.

Its ESPN+ and Hulu platforms are also doing well, with subscribers of 12.1 million and 39.4 million, respectively. Both figures also topped estimates. The three platforms combined for 146 million subscribers.

Obviously, COVID-19 has helped accelerate this part of its business, despite wreaking havoc in Disney’s other businesses. 

With investors and the company looking to put 2020 behind them, let’s look at the charts as Disney hovers at new highs.

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Trading Disney

Daily chart of Disney stock.

Daily chart of Disney stock.

As a result of the company’s earnings, analysts are already raising their price targets. Morgan Stanley now has a $200 price target, while Keybanc is out with a $225 target.

Shares have been struggling with the $190 level all week. In early Friday trading, Disney climbed as high at $193.85.

Now falling from that area, the stock is catching a bid off the lows. Can it hold the $190 area as support? If it can, that bodes well for another test of its current high.

Above $194 and Disney will have the green light to push up toward $200 and the 161.8% extension. This extension is measured from the Q1 2020 low to the preceding high.

For the record, if we drew in the 161.8% extension from the recent January low to the December high, it would come into play around $197.50.

For what it's worth, the two-times range extension is up near $227. It seems as if the analysts may know a thing or two about Fibonacci extensions. 

Should Disney take out Friday’s current low, let’s look for a test of the 10-day moving average. The stock has been very strong lately and hasn’t tested this moving average in nine sessions.

Look to see if investors buy the dip near this mark, which also comes into play near the former highs from December. 

A break of $180 could put the 50-day and 10-week moving averages in play.