Walt Disney (DIS - Get Report) reported a solid earnings report Thursday and the stock opened Friday with a high of $140.25, gapping above its annual pivot at $138.93 but then slipped back below this key level as a pivot, or magnet. My call is to buy the stock on weakness to its quarterly pivot at $134.91, which is also a magnet. Book profits on strength to its all-time intraday high of $147.15 set on July 29. The maximum upside this month is the risky level for November at $151.63.
Disney is a media giant and an important component of the Dow Jones Industrial Average. The Mouse House solidly beat its fourth-quarter estimates as it prepares to launch Disney+, its streaming service, next week. Here's the coverage as reported by TheStreet.
Before reporting earnings, shares of Disney closed Thursday at $132.96, up 21.3% year to date and in bull market territory 32.5% above its Dec. 24 low of $100.35. The stock was 9.6% below its all-time intraday high of $147.15 set on July 29.
The stock isn't cheap as its P/E multiple is 20.93 with a dividend of just 1.34%, according to Macrotrends.
Some on Wall Street sight warnings on Disney's future. A concern is while Disney focuses on its upcoming streaming launch, they still face pressure from pay-TV customers. In addition, Disney streaming will face competition from services from Apple (AAPL - Get Report) , AT&T (T - Get Report) and others.
The Daily Chart for Disney
Courtesy of Refinitiv XENITH
The daily chart shows the formation of a "golden cross" on April 4 when the 50-day simple moving average rose above the 200-day simple moving average to signal that higher priced lie ahead. This tracked the stock to its all-time intraday high of $147.15 set on July 29. The close of $109.65 on Dec. 31 was the input to my proprietary analytics and the annual pivot remains in play at $138.93 which is the magnet post-earnings. The close of $139.64 on June 28 was another important input to my analytics. The semiannual value level at $111.33 is well below the market price. The close of $130.32 on Sep. 30 was another input to my analytics its quarterly pivot at $134.91 is now a nearby value level. The close of $129.92 on Oct. 31 was another input to my analytics and its monthly risky level for November is $151.63. The low of $128.75 on Oct. 31 proved to be a buying opportunity at its 200-day simple moving average, then at $129.09.
The Weekly Chart for Disney
Courtesy of Refinitiv XENITH
The weekly chart for Disney is positive with the stock above its five-week modified moving average of $133.80. The stock is well above its 200-week simple moving average or "reversion to the mean" at $109.63, last tested as a buy level during the week of Dec. 28, 2018. The 12x3x3 weekly slow stochastic reading is projected to rise to 31.09 this week up from 21.13 on Nov. 1.
Trading Strategy: Buy Disney on weakness to its quarterly value level at $134.91 and reduce holdings on strength to the all-time high at $147.15. The annual pivot at $138.93 remains a magnet.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sep. 30 established the level for the fourth quarter.
The close on Oct. 31 established the monthly level for November.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.
To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.