Walt Disney Co (NYSE: DIS)

The Walt Disney Company, together with its subsidiaries, operates as an entertainment company worldwide. The company operates broadcast and cable television networks, domestic television stations, and radio networks and stations. Its cable networks include ESPN, Disney Channels, and ABC Family. It also owns and operates the Walt Disney World Resort in Florida, Disneyland Resort in California; Disney Resort & Spa in Hawaii; Disney Vacation Club, Disney Cruise Line, and Adventures by Disney; and Disneyland Paris, Hong Kong Disneyland Resort, and Shanghai Disney Resort, as well as licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan. Further, it produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings, and live stage plays.

Take a look at the 1-year chart of Disney (NYSE: DIS) below with added notations:

1-year chart of Disney (NYSE: DIS)

DIS had been in a consistent downtrend since November, but in February the stock began to rally. That rally stalled during the 1st week of March when DIS started trading in a sideways range. While in that sideways move, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.

The DIS rectangle pattern has formed a resistance at $100 (red), and a $96 support (green). At some point the stock will have to break one of the two levels.

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The Tale of the Tape: DIS is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $96 or on a breakout above $100. The ideal short opportunity would be on a break below $96.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach