If This Key Level Is Lost, Magic May Be Needed To Support Disney Stock

Walt Disney Co's DIS "Jungle Cruise" topped the weekend U.S. box office and raked in $43.1 million in ticket sales. Despite customers returning to theatres and Disney reopening its parks the stock has failed to get any bullish traction and has traded sideways for the past five months.

Traders and investors could be concerned the rapidly spreading COVID-19 Delta variant will result in more restrictions or even lockdowns, which would adversely affect Disney’s revenue, or perhaps they're waiting to see how the reopening has impacted Disney’s earnings when it prints its results Aug. 12 after the closing bell. While investors will see revenue from Disney’s parks again in the third quarter, all eyes will be on whether the company has been able to continue growing its streaming service.

See Also: Why This Investor Recently Bought Disney And Netflix

The Disney Chart: Disney’s stock traded in a downtrend from its March 8 all-time high of $203.02 until putting in a bottom at 167.10 on May 19. The stock then coiled into the apex of a triangle and broke up bullish from a descending trendline that had been holding it down.

The bullish break didn't come with momentum, however, and lack of bullish volume meant there was no follow-through on the break. Disney’s stock then tested and retested the trendline as support and, although the stock is holding above it, Disney lost support at $176.49 on Friday.

There are two gaps below on Disney’s stock, one between about $157 and $160 and a second between $129 and $133. Gaps fill about 90% of the time, so it's likely Disney will trade at those levels in the future.

Disney’s stock has also lost support of the eight-day and 21-day exponential moving averages (EMAs) and the eight-day EMA looks poised to cross below the 21-day EMA, both of which are bearish indicators. The 200-day simple moving average (SMA) is approaching Disney’s stock and for overall sentiment in the stock to remain bullish Disney will need to continue trading above it.

• Bulls want to see Disney’s stock remain above the SMA and for it to regain support at $176.49. If it can regain the level as support, it could recapture the EMAs which could then prop it back up toward the $182 level.
• Bears want to big bearish volume push Disney’s stock down toward a support level at $171 which aligns with the 200-day SMA. If Disney were to lose the levels as support it could test support at $167.10. A loss of that key level could mean the stock is headed down to fill the higher gap.