When to Buy Disney as Coronavirus Cases Begin to Spike

Disney is back under pressure coronavirus cases continue to climb. Now the reopening of its parks is in jeopardy
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Shares of Walt Disney  (DIS) - Get Report were down about 2% on Thursday. While the news headlines were working in Disney's favor at one point, they are working against the stock now.

When coronavirus cases were falling in the U.S., investors were optimistic about a return to sports and about reopening theme parks.

Disney had plans to re-open its California parks next month, but the company plans to delay that move as coronavirus cases start to spike.

While a return to sports action is still up in the air, that presents both an opportunity and a risk for Disney. Should seasons get delayed or canceled, the company and its ABC and ESPN units will miss on advertising revenue.

On the plus side, the company has its Disney+ streaming platform, but investors can only grasp at that catalyst for so long. Particularly when there are other competitors to consider, like Netflix  (NFLX) - Get Report, Amazon  (AMZN) - Get Report and AT&T’s  (T) - Get Report HBO.

Disney and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells DIS or AMZN? Learn more now.

Trading Disney Stock

Daily chart of Disney stock.

Daily chart of Disney stock.

I do believe that Disney is a great long-term holding, particularly with the momentum we’re seeing in its new streaming platform. However, given the number of obstacles it faces right now, the stock selloff is more than deserved.

The rally in early June took Disney stock to its highest levels since February. However, shares were rejected by the 200-day moving average and downtrend resistance.

Since then, Disney stock has struggled to garner upside momentum. It’s clear that bulls have lost control with this one.

Shares are below the 20-day and 50-day moving averages, as sellers continue to pressure the name lower. However, it’s now filling the gap left behind from May. Just below that is the 38.2% retracement near $107.50.

I’m not too giddy to pile into a stock with waning momentum. However, aggressive bulls may consider a long position near current levels, with the understanding that, should the 38.2% retracement fail to support Disney stock, shares could be heading for $100.

Many long-term investors would love another shot at Disney stock at $100.

On the upside, look for Disney to reclaim the 50-day moving average, followed by the 50% retracement and 20-day moving average. Above these marks puts the 200-day moving average back in play.