The American diversified multinational mass media and entertainment conglomerate headquartered at the Walt Disney Studios in Burbank, California, Walt Disney Co (NYSE: DIS) seems to be ready for a price surge as per its latest charts.
#1 Ascending triangle pattern Breakout: DIS’s daily chart shows that the stock has been recently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level. Currently, the stock has broken out of the ascending triangle pattern with a very high volume, which is usually a bullish sign.
#2 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA, which implies that the bulls are currently in control.
This indicates possible bullishness.
#4 MACD above Signal Line: The MACD (light blue color) is currently above the MACD signal line (orange color) in the daily chart.
This typically indicates a bullish setup.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX is moving up from below (-DI) and (+DI).
#6 Channel Breakout: As you can see from the weekly chart of DIS, the stock was trading within an uptrend channel for the past several weeks. This channel is marked on the chart in purple color. After many unsuccessful moves to break out, the stock has finally broken out of this channel. This looks like a bullish indication.
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 Bullish ADX: The ADX line is starting to move up from below –DI and +DI lines in the weekly chart. The +DI line is also currently above –DI line. This indicates possible bullishness.
#9 MACD above Signal Line: In the weekly chart, the MACD line is above the MACD signal line which is a bullish signal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for DIS is if it corrects to the price of around $125. Alternatively, you can also purchase the shares of DIS if it closes above the previous high. This translates to a price of around $135.
TP: Our target prices are $135 and $150 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $119.80 (for entry near $125) and $129.00 (for entry near $135). Note that this stop loss is on a closing basis.
Our target potential upside is 8% to 20% in the next 4-6 months.
- Entry at $125: For a risk of $5.20, the target rewards are $10.00 and $25.00. This is a nearly 1:2 and 1:5 risk-reward trade.
- Entry at $135: For a risk of $6.00, the target reward is $15.00. This is a nearly 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.