The American diversified multinational mass media and entertainment conglomerate, Walt Disney Co (NYSE: DIS) seems to be getting ready for a price bump in the short-term as per the latest charts.
Bullish Move – Chart Indications
#1 Downtrend Channel: As you can see from the daily chart of DIS, the stock has been forming a downtrend channel for the past several weeks. This pattern is marked in pink color in the daily chart. Currently, it is trading near the bottom rail of the channel. Once it reverses from this level and breaks out from the channel, it may move higher.
Daily Chart – DIS
#2 Oversold Stoch: The daily chart shows that the stochastic is near oversold levels, indicating that a possible bullish reversal is around the corner.
#3 Oversold RSI: The RSI has currently started to move up from oversold levels, indicating possible bullishness.
#4 CCI-Price positive divergence: In the daily chart, the CCI is moving up after reaching below -270, indicating bullishness.
There is also a CCI-Price positive divergence on the weekly chart.
The CCI made a higher low while the price made a lower low.
This is marked on the chart as blue dotted lines. This indicates that the selling pressure is reducing and the stock may move higher.
#5 Near Support Area: The weekly chart shows that the stock is currently trading near a resistance-turned-support level. This is marked as an orange dotted line. This is a possible bullish sign.
Weekly Chart – DIS
#6 Oversold RSI: The RSI is currently near oversold levels and starting to move up in the weekly chart, indicating possible bullishness.
#7 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before resuming its upmove. DIS has currently taken support at its 61.8% retracement level, which seems like a good support area for the stock.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal entry level for DIS is at a price range between $97 and $104. This is marked as green dotted lines in the daily chart above.
TP: Our target prices are $120 and $130 in the next 3 to 6 months.
SL: To limit risk, place a stop loss at $90.00. Note that the stop loss is on a closing basis.
Our target potential upside is 20% to 30% in the next 3-6 months.
Entry near $100: For a risk of $10.00, our first target reward is $20.00 and the second target reward is $30.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel with high volume. 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 the sector.
Happy Trading!
Tara
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