DIS Stock: A Very Powerful Pattern Is in Development
It brings me great joy to showcase Walt Disney Co (NYSE:DIS) stock because there is a very large and powerful technical price pattern currently in development on the DIS stock chart, and its implications are significant.
This pattern is being created at a time when the equity markets are on a continuous streak of higher highs and new all-time highs are a daily occurrence. The last time I witnessed a market as bullish as this one was during the dotcom era and it was characterized by extraordinary parabolic moves to the upside.
The current market environment is starting to exhibit similar characteristics and I have the inclination to believe that once the technical price pattern that is being painted on the Disney stock chart resolves itself, a powerful move in DIS stock can be expected to follow.
The following Disney stock chart illustrates the technical price pattern currently in development.
Chart courtesy of StockCharts.com
The pattern highlighted on the DIS stock chart is a triangle. Triangles like this one develop when the price action is characterized by a sequence of lower highs and higher lows.
I used two trend lines to define this pattern and each respective trend line was created by either connecting the sequence of lower highs or higher lows. The end result is two converging trend lines, where one trend line acts a level of price resistance and the other acts as a level of price support.
As the pattern develops, the convergence of space between support and resistance causes momentum to build in the pattern. This momentum will eventually be released when the pattern is resolved, when either the stock price breaks above resistance or falls below support.
The size of this pattern is directly related to the reaction that can be expected once the pattern is resolved. So as a result, the longer this pattern is in development, the more powerful it becomes. The triangle pattern on the Disney stock chart is approaching two-and-a-half years in development, which makes it a large pattern, suggesting that a large reaction in DIS stock can be expected to follow once it is resolved.
I have the inclination to believe that this pattern will resolve itself in a bullish manner by breaking above resistance.
This inclination for a bullish resolution is based on the bullish trend that has preceded it. This predominant bullish trend has been constructive in nature, which increases the odds of a bullish resolution to the triangle.
The predominantly bullish trend, which has been constructive in nature, is illustrated on the following Disney stock chart.
Chart courtesy of StockCharts.com
Constructive price action is the foundation of a bullish trend, which was created using impulse waves and consolidation waves.
The waves highlighted in green are the impulse waves and they capture the period in a bullish trend when the stock price makes a sustained move toward higher prices.
The waves highlighted in purple are the consolidation waves and they capture the period in a bullish trend when the stock price corrects and refrains from advancing. Consolidation waves are very important waves because they unwind any overbought conditions that were created in the waves that preceded it, which set the stage so an advancing impulse wave can follow.
The triangle pattern that was highlighted on the DIS stock chart doubles as a consolidation wave and its completion would suggest that a new advancing impulse wave is in development.
The type of wave within this bullish trend has coincided with signals generated by the moving average convergence/divergence (MACD) indicator.
MACD is a momentum indicator that distinguishes whether bullish or bearish momentum is influencing the trading action in a stock. Momentum is a powerful indication because a sustained move in either direction cannot occur without the applicable momentum.
For instance, a bullish MACD signal has coincided with impulse waves while a bearish MACD signal has coincided with consolidation waves. This means that in a bullish trend, a bullish MACD cross paves the road toward higher prices, while a bearish MACD cross implies that a price correction is taking place.
Currently, the MACD signal lines are converging and a bullish MACD cross will likely coincide with the completion of the consolidation wave. Both these indications will suggest that much higher Disney stock prices are on the horizon.
There is a very large technical price pattern developing on the Disney stock chart that carries powerful repercussions. A break above resistance will complete this pattern, which will imply that much higher DIS stock prices are likely to follow.
At this current juncture, I am holding a neutral position on this investment, awaiting a resolution of this price pattern, with the inclination that a bullish outcome is probable.