Time to trade some media stocks.
Having come in long some Walt Disney (DIS - Get Report) , my first thought is to shore up my game plan in the name as my position is complex and I would prefer to not have to unwind the darned thing, though even at last night's lows, the position was not yet what I would consider dangerous. It is now obvious that Disney will have to come up with a better bid, or risk losing out to rival Comcast (CMCSA - Get Report) in pursuit of the content offered by Twenty-First Century Fox (FOXA . There is no short-term win here for Disney. Either they cough up some more treasure, or allow the competition to walk away with what they themselves desire.
As I have already stated, I come in long (about 25% of what I consider to be a full position in this name). My net basis on the equity alone is 100.02. I also come in short a bevy of put options that when factored in drag that net basis down to 98.63. These puts will expire over a time frame spanning from this July 20th though January 2019, and do not put me at risk of having to add to my equity risk until the shares start trading at $90 and below. BTW, earnings are due on August 7th.
Significant news events always trump short-term technical analysis. ALWAYS. Those news events do not however prevent previously written algorithms from reacting to larger levels in the medium to longer term. What becomes obvious here is the recent double top close to 105, and the double (sort of triple) bottom just below 98. Your 200 day SMA stands at 102.84, and the 50 day SMA lives at 101.35. These moving averages will come into play this morning.
Watch what one veteran deal-maker told TheStreet about the decision.
What those long Disney must be alert to today is a break of that 50 day. This would allow for movement as low as the already tested spot below 98. Both of these models permit for a significant move to the downside (low to mid 90's) should 98 snap. That's why I write puts at unlikely prices when I see premium. Raises revenue while putting one at risk where one sees opportunity if forced. Do I act today? I probably take some profit above par (100), if the 50 day SMA snaps.
Am I afraid? No. Never. Rule to remember... No emotions allowed. Ever.