On Tuesday, news of Major League Baseball getting started next month helped give shares a jolt, up about 3%. While the rally may not last, it was enough to push Disney shares back over $100.
Although the long-term story for Disney is a great one - particularly with its Disney+ platform - it’s hard to say it didn’t deserve a selloff. Theme parks around the world have shuttered their doors and filming and studio releases have been pushed back. As if that weren’t enough, Disney’s cable division, led by ESPN, will take a massive hit during this period.
On the bright side, Disney’s Fox acquisition helped to bolster its content portfolio. Further, subscriptions for its streaming platforms are doing well too. Investors will breathe a sigh of relief if the MLB starts back up next month, alongside the NBA - even if there are no fans at the venues.
Did Disney stock deserve a 48% peak-to-trough decline? Possibly. But that massive haircut gave long-term investors an opportunity to buy the stock, provided they are willing to hold it for several years. Let’s look at the charts.
The stock had back-to-back weeks where it dipped below $85, giving investors plenty of opportunity to scoop up some shares on the cheap. On the ensuing rebound, Disney stock has quickly pressed higher, as it attempts to maintain above $100.
While the rally has been impressive, Disney still has a pretty tough fight ahead - at least, technically speaking.
Near $110, both the 200-week moving average average and prior uptrend support (blue line) loom large. It would surprise me if Disney shares quickly reclaimed these levels. If it were to, it would also need to reclaim the $116 level, which was long-term resistance, and the 150-week moving average.
At this point, it’s possible but hard to imagine Disney shares gaining traction above $120 in the short term. If they do, we will revisit the stock as the situation will have clearly changed. For now, the technicals suggest that the maximum short-term upside is up to the $110 to $115 area.
On the downside, a move back below $100 is certainly possible. In that event, bulls would like to see the $92 mark support the stock, a level has proved relevant in recent weeks. Below puts sub-$90 in play and in my opinion, would present investors with a solid long-term buying opportunity.
While a dip down to $85 is possible in that scenario, even long-term bulls do not want to see Disney stock make fresh lows. Particularly as good news is starting to make the rounds, both regarding COVID-19 and about the MLB. From here, let’s see how shares handle $110 on the upside and $92 on the downside, provided Disney drops back below $100.