Walt Disney Co (NYSE:DIS) stock is in a downward spiral after hitting a 3 month high earlier this month. Is DIS stock on the recovery path after the post earnings weakness?
Shares of media and entertainment giant Walt Disney (NYSE:DIS) had previously risen to a 3 month high at the beginning of this month before being caught in a downtrend, further accentuated by lackluster Q3 earnings. Disney stock has slowly picked itself from the recent lows at the $100 level and is presently trading at the $102 level. For the past few trading sessions, DIS stock has mostly traded sideways, fluctuating around the $102 mark. With the influx of some positive news recently, things are looking better for the Bob Iger led company. The big question now is, is the downtrend in Disney stock coming to an end? Has DIS stock gone past the bottom? Let's take a closer look.
Technicals suggest a mixed scenario.
Disney stock is presently trading below all the key Simple Moving Averages (SMA), be it the short term 20-day, 50-day, 100-day or the long-term 200-day SMA. Further, the stock enjoys a strong support at the $100 level from which it had rebounded recently and has not fallen below that mark in 2017. Given the slight recovery and signals from other technical indicators such as Relative Strength Index( RSI) and Bollinger Bands, it seems that the stock is past the bottom. The RSI indicator measure has also slowly risen above the oversold threshold of 30. And, also the share price has rebounded after touching the lower Bollinger Band. The recent sideways movements suggest that the stock is entering into a consolidation phase.
At the same time, there are some bullish technical signals in sight. The stock could see a bullish Moving Average Convergence Divergence (MACD) crossover as early as the next trading session. Presently, the MACD line and the signal line have intersected and the former should rise above the latter soon, suggesting a bullish signal. This bullish signal should give some impetus to the recovery of DIS stock. The stock faces its next resistance at the short term 20-day SMA, which stands at 103.74. Things might be looking good for the stock on account of this bullish crossover.
However, it's not all that rosy on the technical front. The stock could edge higher before seeing a further dip. The Disney stock daily chart suggests that the stock is on the verge of a bearish 'death cross'. Investopedia defines it as "a crossover resulting from a security's long-term moving average breaking above its short-term moving average or support level." In Disney's case, the long-term 200-day SMA is poised to go past its shorter-term 100-day SMA. The two trend lines are only separated by a few cents and the bearish crossover could happen in the next few trading sessions. This bearish crossover is further reinforced by strong volumes and the recovery in Disney stock could hit a bump on account of this. Investors need to be wary of this and have to closely monitor the charts before making a move.
Recent positive news lifts the spirit of investors.
The news of Disney and NVIDIA (NASDAQ:NVDA) teaming up on Artificial Intelligence(AI) for making better movies is a welcome news for long-term investors. Anything Disney can do to help delight consumers with its products should help the company increase its profits, especially the movies segment which has been a strong segment for the company. One major announcement from Disney's last earnings call was the announcement that it would pull the plug on Netflix Inc (NASDAQ:NFLX), and start its own direct to consumer streaming service. There were initial apprehensions of how this move may pan out but a recent survey suggests that over a third of millennials say they’ll pay for Disney’s streaming service. This is really encouraging news for long-term investors and the survey's findings are giving a big boost to the possibility of Disney's streaming service carving out a niche for itself.
The influx of such positive news should help the recovery of Disney shares. Investors who are on the look out for making a move should closely watch the technicals. All in all, the technicals offer a mixed outlook and the stock needs some new catalyst to shrug off the recent weakness. It may take a little longer for Disney shareholders to see light at the end of the tunnel.
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