Indications Continue to Support Higher Disney Stock Prices

DIS stockBullish Signals Are Mounting for DIS Stock

I had been fortunate enough that I was tracking Walt Disney Co (NYSE:DIS) stock as it was approaching a major level of support late last year. This successful test of support and the subsequent bullish price action were the basis for proclaiming that the correction in DIS stock had concluded, and that higher prices were likely.

With DIS stock currently trading at $110.67, it can be said that this view has proven to be correct, and it was solely based on the indications that were produced using the Disney stock chart.

The method of analysis I employ is known as technical analysis, and it is based on the notion that historical price and volume data can be used to discern trends and forecast future prices. I have been using this method to create investment strategies for nearly two decades, and have become quite proficient in this method of analysis. It was this method that correctly suggested that Disney stock was set to appreciate, and all the indications on the price chart continue to suggest that higher stock prices are a likely endeavor.

The following stock price chart illustrates the long-term trend in Disney stock, and features an indicator that is suggesting that higher prices are on the horizon.

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DIS Stock chart

Chart courtesy of StockCharts.com

The long-term bullish trend in Disney stock is defined by using an ascending channel. This channel that began in the aftermath of the financial crisis is created by using two upward-sloping parallel trend lines. One trend line acts as support and the other trend line acts as resistance. This channel has contained the price of Disney shares and, as long as the price stays within the confines of support and resistance, there is no reason to believe that this bullish trend will end.

Support outlined by this channel was being tested late last year, and I was fortunate enough to be tracking this investment as it occurred. This level of support held. To stay true to the oscillating action of this pattern, the next logical objective for the price is to test the level of resistance that is outlined by this ascending channel.

The moving average convergence/divergence (MACD) indicator in the lower panel has had a good track record of confirming the predominant trend within the ascending channel. MACD is a simple and effective trend-following momentum indicator in which signal-line crosses are used to distinguish between bullish and bearish momentum.

The bullish cross that was just generated is suggesting that bullish momentum is now propelling DIS shares, and that the path of least resistance is geared toward higher prices. In this context, it also serves to reinforce the notion that that resistance outlined by the channel is going to be tested.

The following DIS stock price chart illustrates the development which first suggested that a bullish view was warranted.

DIS Stock

Chart courtesy of StockCharts.com

On its route to test support that was outlined by the ascending channel, a downtrend developed. This downtrend is created by connecting the peaks on the price chart, and this trend line has served to contain the price as Disney shares drifted lower after peaking in 2015.

This downtrend line and the support outlined by the ascending channel began to converge late last year. The price held above support, and then followed to break above the downtrend line. This price action suggests that the bearish trend that had contained the price has concluded, and that a new trend toward higher prices has begun.

This new bullish view played out as expected, and the price quickly advanced to the upside. During this advancement, bullish signals began to mount.

In December 2016, a golden cross was generated. A golden cross is a bullish indicator that is generated when the faster 50-day moving average (highlighted in blue in the above chart) crosses above the slower 200-day moving average (highlighted in red).

This indicator is used to confirm the view that a bull market is development, and it serves to reinforce the bullish view that has already been suggested by the price action that preceded it.

The following Disney stock chart illustrated the constructive price action that supported this advance.

DIS Stock

Chart courtesy of StockCharts.com

The advance off of the support has been filled with constructive price action. Constructive price action consists of impulse waves that serve to advance the price, and consolidation waves that serve to alleviate overbought conditions and set up the next impulse wave. The alternating waves that define constructive price action allow a trend to remain sustainable.

The impulse waves are highlighted in green in the chart above, and the consolidation waves are highlighted in purple. Every time the price has exited a consolidation wave, a new impulse wave has developed that has advanced the price to new interim highs. The current consolidation pattern looks complete, and this suggests that a new impulse wave is now set to develop, and higher DIS stock prices are likely.

Bottom Line on Disney Stock

I am bullish on Disney stock because the indications on the DIS stock chart support the notion that higher prices are set to prevail. As long as the price action remains constructive and the indicators continue to support an advance, I believe that resistance outlined by the ascending channel is going to be tested.