Disney Earnings Preview: What the Charts Say

After a rally this week, Disney is set to report earnings on Thursday after the close. Let's look at the charts.
Author:
Publish date:

Shares of Disney  (DIS) - Get Report have been volatile over the past few weeks. Despite Wednesday’s decline, the stock is still up about 9% this week.

Disney stock had been treading water for a few months. While not fully breaking down, the stock was trending lower as the coronavirus continued to hang over the stock.

Investors are thankful for the company’s Disney+ streaming platform, but its parks and studio units are really hurting right now.

As a result, the company has had to resort to layoffs as it burns through cash and awaits better days.

That’s why when Pfizer  (PFE) - Get Report said it has a viable vaccine for Covid-19 with a 90% effective rate, Disney shares popped.

Coronavirus cases continue to fly higher and a vaccine will take a while before it’s widely available. Still, it’s a step in the right direction and shows that society might be able to return back to normal life sooner than previously expected.

With earnings due up on Thursday after the close, let’s look at the stock.

Disney is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells DIS? Learn more now.

Trading Disney Stock

Daily chart of Disney stock.

Daily chart of Disney stock.

As I mentioned earlier, the shares were trending lower, although not plunging. In late October, Disney stock flirted with a breakdown below the 200-day moving average. 

But it ended up holding as shares reclaimed the 100-day moving average and were working on the 50-day moving average. Then Monday’s gap-up action sent the shares soaring.

Disney cleared the third-quarter highs from August and September, as well as the 78.6% retracement. It also filled the gap from back in February.

That leaves the stock in a somewhat precarious, although well-defined, position ahead of the earnings report.

On the downside, I would love to see the $135 level hold up as support. That area was solid resistance last quarter and seeing it hold as support would be impressive for the bulls.

That said, a dip back down to the $127.50 area wouldn’t be the end of the world, either. There, Disney stock will find the 50-day moving average and the backside of prior channel resistance (blue line).

On the upside, let’s see if Disney stock can take out this month’s high near $147.70. Above could put the all-time high in play up near $152.50. Above that could set the stage for a test of the 123.6% extension, which is just shy of $170.