Shares of Disney (DIS) - Get Report have been fighting to retake the $100 level for the last two months and have failed. After a foray of attempts two weeks ago, they retreated last week, gapping lower and moving below their 50-day moving average.
This failure is part of a bearish scenario apparent on multiple timeframes.
The weekly chart shows the steady multi-year rising channel rally off the 2011 low, followed by a channel breakout in early 2015 and then a sharp drop back down to channel support later that year. Volatility continued, and the stock managed a sharp bounce and rallied back up to the channel breakout high, but that energy was expended quickly, and it dropped again, this time taking out channel support.
Efforts to re-enter the channel range in April and May were unsuccessful, and momentum faded taking the share price back below the $100 level. The relative strength index has moved below its center line, and accumulation/distribution crossed below its 21-period signal average. A double top may have been formed by the 2015 highs, and the price action below channel support this year resembles a head and shoulders top. The price action and the technical indications on the weekly chart suggest a negative shift in the trend.
The attempts to retake the $100 level can been seen on the daily chart, and just above that barrier are two more levels of resistance supplied by the 200-day moving average and a downside gap created in May. As indicated on the weekly chart, the stock has been under pressure for more than two months. At the top of the daily chart is a performance graph of Disney relative to the S&P 500, and it has underperformed the index by 26% over the last eight months. Moving average convergence/divergence is making a bearish crossover just above its center line, and Chaikn money flow is below its signal average and in negative territory.
The stock is a good risk/reward short candidate at its current level using a protective trailing buy-to-cover stop. Short positions are highly speculative by nature, and the prime trading directive is preservation of capital.
This article is commentary by an independent contributor. At the time of publication, the author is short Disney.