Walt Disney Co.'s (DIS) price action isn't looking very family-friendly right now.
In fact, shares have been looking downright toxic in recent months, as Disney has shed more than 16% of its market value since peaking back at the end of April. Last week added another challenge to Disney's upside -- shares dropped after the firm posted guidance that saw full-year earnings in line with last year's numbers. Analysts were hoping for bigger profits in 2017.
It's not that Disney is a bad company, but it's a bad stock right now.
In other words, Disney may be executing on a lot of levels, but sellers are controlling the price action. And as long as that remains the case, Disney will remain a stock that you don't want to own for your portfolio.
To figure out exactly what Disney's price trajectory looks like, and how to trade it from here, we're turning to the charts for a technical look.
Since topping out earlier this year, it hasn't been too hard to decipher Disney's price action. Shares have been trending lower in a well-defined downtrend in the intervening months, selling on each of two successive tests of trend line resistance. Disney didn't get the chance to make a third attempt at that price ceiling, though: Shares violated support on Thursday after the guidance update.
That support violation is significant because it's a signal that Disney's downtrend is potentially accelerating, not slowing.
Confirmation of that comes from relative strength, the side-indicator down at the bottom of Disney's chart. Relative strength measures Disney's performance vs. the rest of the market, and the fact that it's in a downtrend of its own right now means Disney remains statistically inclined to continue underperforming the broad market as we head toward the end of the year.
So, if sellers are in control of Disney's price action, the real question for buyers is when that situation changes. Simply put, Disney needs to trade above the top of its prior resistance level for its shares' trend trajectory to flip in favor of bulls again. That's not an insignificant move from here; shares would need to cross above $108 to trigger a buy.
Meanwhile, a bounce off of prior trend line support is a real risk in the immediate-term -- $99 could be a level that swats Disney lower again. Buyers should steer clear of this entertainment giant until that selling plays out.
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