Walt Disney Co: These DIS Stock Charts Say It All

DIS stockDIS Stock: Moving on Up

In my last publication on Walt Disney Co (NYSE:DIS) stock, I outlined that a bearish signal was finally broken and, as a result, this meant that the bearish headwinds that were causing me much concern were starting to subside. This also meant that bullish tailwinds were beginning to mount.

These bullish tailwinds were necessary to mount a rally because DIS stock was sitting at an extremely important level of price support. Higher prices were needed, or else the long-term bullish trend that spanned almost a decade could have been in jeopardy.

Since that infamous report, Disney stock has gone on quite a run. It was trading at $95.99 when I identified that bullish tailwinds were beginning to mount, and it is currently trading at $102.93. That is a steady 7.2% return since November of this year.

If bullish tailwinds continue to mount, this could mark the beginning of an epic run that could take DIS stock to unimaginable heights.

The following Disney Stock chart illustrates the pattern that suggested bullish tailwinds have begun to swirl.

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Chart courtesy of StockCharts.com

The breakout highlighted on the Disney stock chart is the point at which the bearish headwind known as the downtrend line was broken. This downtrend line is created by connecting the peaks on the price chart. This trend line rejected DIS stock whenever it attempted to move above it. Breaking above it was the first sign that bullish headwinds were starting to mount, and reduced some of the concerns I had with DIS stock.

My concerns were not completely alleviated, because a bearish death cross was, and still is, engaged. A death cross is a signal that is generated when a faster 50-day moving average (highlighted in blue) crosses below a slower 200-day moving average (highlighted in red). This signal is used to confirm that bearish momentum is outweighing bullish momentum and, as a result, the path of least resistance is lower.

The death cross might soon be a thing of the past. The appreciation in the price of Disney stock has taken it to levels in which it is trading above both moving averages and, as a result, it has caused the moving averages to converge. This increases the probability that a bullish signal could generate in the coming weeks.

A bullish cross would generate a golden cross, which is the complete opposite of a death cross, and would suggest that a bull market is on the horizon. It is not uncommon for the trend to accelerate to the upside after this signal is generated.

The following Disney stock chart illustrates the long-term trend that was in jeopardy of breaking.

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Chart courtesy of StockCharts.com

The chart above illustrates the long-term pattern driving performance in Disney stock. This pattern is what traders refer to as an ascending channel. This channel is created by using two parallel lines that act as support and resistance. This pattern has contained Disney stock during its entire bull market rally that began after the financial crisis concluded in 2009.

As long as the price of Disney stock is within this channel, the bull market is set to continue. Now that I have established that bullish tailwinds have begun to swirl, DIS stock could be targeting the resistance level outlined by this channel. Resistance is an upward-sloping trend line and, as time progresses, this level continues to rise. This is why the upside potential is unimaginable, because it is difficult to estimate what this price will be when DIS stock reaches it. What I do know is that currently, resistance defined by this level sits north of $150.00 and is increasing every day.

The moving average convergence/divergence (MACD) indicator on the lower panel of the chart above is beginning to converge, and a bullish cross can occur in the months ahead. MACD is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals. Every prolonged bullish run in Disney stock was confirmed by a bullish MACD cross.

Bottom Line on DIS Stock

The bear market that suppressed the Disney stock price for the past year is heading back into hibernation, and a new bull market is set to take its place. My bias on DIS stock will continue to be bullish for as long as the stock chart suggests so.