Disney Stock Squeezes Into Well Defined Pattern: What's Next?

Walt Disney Co DIS has gone forward with its plans to update its parks throughout the pandemic although some of its plans have been delayed. Disney’s newest addition, its World-based Galactic Starcruiser hotel, was originally slated to open this year but will now open in spring 2022.

The new hotel, which is being built near Disney's Hollywood Studios, in Florida, expands on the company’s 2019 debut of “Galaxy’s Edge” -- an immersive Star Wars-themed experience that encompasses 14 acres at both its Florida and California-based parks.

Disney’s Starcruiser hotel promises to deliver “part live immersive theater, part themed environment, part culinary extravaganza, part real-life, role-playing game” but the experience doesn’t come cheap with a price tag of $6000 for a family of four.

Disney’s stock could be at a discount, however, if the triangle pattern on its chart becomes recognized.

See Also: How to Buy Disney Stock & Where to Buy It

The Disney Chart: Disney has traded mostly sideways for the past five months but the stock’s range has slowly begun to tighten and it looks to be settling into a triangle. Disney has held above the bottom ascending trendline of the triangle since Dec. 11, 2020, and has been held below the upper descending line of the triangle since April 5.

On Tuesday and Wednesday, Disney’s stock tested support of the lower trendline and held above it. If the triangle pattern is recognized, Disney’s stock should pop back up to test resistance at the top line of the triangle.

For bullish traders, an entry on Disney’s stock at the bottom of the triangle may offer good risk/reward. The bullish thesis would be invalidated if Disney were to lose support of the lower trendline.

Disney is trading below the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending below the 21-day, both of which are bearish indicators for the short term. Disney’s stock is trading in line with the 200-day simple moving average (SMA) indicating there is indecision as to whether the overall sentiment is bullish or bearish.

It should be noted there are two lower gaps on Disney’s stock and because gaps fill 90% of the time it is likely Disney will trade down towards the $157 and even the $128 levels in the future.

• Bulls want Disney to bounce from its lower trendline and bounce up to regain support near $176. If the stock can regain the level as support, it has room to move up toward $182.78 and test the upper descending trendline of the triangle.
• Bears want selling pressure to come in and drop Disney’s stock down through the triangle pattern and below the 200-day SMA. If Disney loses the level as support it could revisit lower support at $167.