Disney Chart Says Stock Could Fall Another 8% - Here Are the Levels to Watch

Disney CEO Bob Iger is stepping aside, and the shares are lower. The charts show why DIS stock could bounce - or decline yet further.
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The broad market bounced gently on Wednesday, but Walt Disney  (DIS) - Get Report shares aren’t along for the ride, down 2.5%. 

The decline came as Bob Iger said he would step down as CEO, enabling Bob Chapek, chairman of parks, experiences and products, to take the helm. 

Iger becomes executive chairman, focused on the more creative side of the business. 

Shareholders have enjoyed having Iger as CEO and his eventual departure has been well telegraphed. 

Some will say that there was no good time for Iger to go, but with its Disney+ streaming service off the ground and the Fox acquisition complete, now seems like a fine time.

Others note the recent uptick in marketwide volatility amid the coronavirus spread - which has a more notable impact on Disney’s business - and they question the company’s decision to change leadership.

The debate makes Disney a perfect candidate for Real Money’s Stock of the Day. Let’s look at the chart.

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Trading Disney Stock

Daily chart of Disney stock.

Daily chart of Disney stock.

The clues to Disney’s current weakness were present even before the real breakdown occurred over the past few trading sessions.

In mid-January, the stock broke below the 20-day and 50-day moving averages, followed by a break below support. This is depicted by the purple arrow on the chart, as a descending triangle played out well for the bears. 

That’s where downtrend resistance (blue line) squeezes a stock against a static level of support, as short-sellers look for an eventual breakdown below support.

Since then, Disney has been riding its 200-day moving average as support, while failing to reclaim its 20-day and 50-day moving averages. In short, the bulls have had little to no momentum, even as the broader market had been making new highs.

So now what?

Down near $125 now, Disney stock is back to the gap-up lows from April 2019. If this holds as support, look for a bounce back to $130-plus. For shares to have any lasting upside momentum though, Disney needs to reclaim its 200-day moving average. 

However, if $125 breaks, a gap-fill down to the $115 area is certainly possible.

That’s an 8% fall from current levels and would wipe out nearly a year’s worth of gains. But ultimately, it will likely be an opportunity for long-term investors.