Disney Has Two Critical Levels to Watch After Post-Earnings Fall

Walt Disney is declining despite better-than-expected fiscal first-quarter results. Here are the key levels to watch in the stock now.
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While the broader market enjoys another stellar day of gains, Walt Disney  (DIS) - Get Report shares were under pressure, falling about 2% after reporting earnings.

Despite beating fiscal first-quarter estimates, buyers haven't stepped up to support Disney stock. Earnings of $1.53 a share beat estimates by 9 cents, while revenue of $20.86 billion eked past expectations by $50 million.

Further, the company said it has registered 26.5 million U.S. subscribers for its Disney+ streaming service, which blew past estimates that stood closer to the 20 million mark.

So why the decline in the stock? That’s a great question, particularly with the overall market performing so well on Wednesday. It makes Disney an excellent candidate as Real Money’s Stock of the Day.

Here's what Wall Street is saying now too

The truth is, Disney stock has been struggling for a few months. The latest earnings report seemed solid, and even though earnings declined about 17% year-over-year and should come in below 2019’s total this year it’s not as if this is unexpected by investors.

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Trading Disney Stock

Daily chart of Disney stock. 

Daily chart of Disney stock. 

In January, Disney was caught in a descending triangle, a bearish technical development. It’s where downtrend resistance (blue line) squeezes the stock price lower against a static level of resistance (black line). In this case, support came into play near $143.

Around mid-month this support level gave way, with Disney shares flushing lower. The stock actually broke below both the 100-day and 200-day moving averages, before finding support near $135 and consolidating near these key moving averages for several sessions.

Surprisingly, this consolidation came as the market was under notable pressure. When equities sprung back to life this week, so too did Disney. In just two sessions, the stock reclaimed all of its major moving averages, prior short-term support near $143 and prior downtrend resistance.

In its post-earnings action though, it’s losing these levels once again.

On the downside, I want to see Disney stock hold the 100-day and 200-day moving averages. It would be a sign that bulls still have some control at this point. Below puts $135 on the table, and if it holds, bulls may find it as a buying opportunity. However, below $135 and momentum will certainly favor the bears, who will likely look to ride DIS stock down to the $126 to $128 area.

So other than holding support, what are bulls really looking for? 

I want to see if Disney can muster up the strength to reclaim its 50-day moving average at $145. Over that and its post-earnings high at $147.30 is possible. Above that and $150-plus is on the table.

Here’s the bottom line: Look to see if Disney stock can reclaim the $143 to $145 area. Below puts the 100-day and 200-day moving averages on the table.