Walt Disney Co: Bullish Tailwinds Mounting in DIS Stock

DIS StockDIS Stock: Bearish Winds Subsiding

Walt Disney Co (NYSE:DIS) stock is making great headway, and my concerns that a bearish outcome might develop have subsided, as a major level of price support has held and the bearish headwinds that pushed DIS stock down have started to dissipate.

The timing on Disney stock is perfect on many fronts. Price support has come in at the exact spot it was anticipated, and Disney is about to release some blockbuster titles that are expected to bump the top and bottom lines. DIS stock is not out of the woods yet, but it is making great strides in getting there.

The following Disney stock chart illustrates the trend that has contained price during its bull market run.


Chart courtesy of StockCharts.com

The chart above illustrates the big-picture trend 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. DIS stock has effectively oscillated within this channel since the stock price bottomed in 2009 after the financial crisis.

The trend line that has acted as support has once again been successfully tested. This trend line is significant and it acts to define my risk in DIS stock. I would use it to set up an appropriate trading strategy. In essence, as long as the price is within this channel, the trend higher will continue. If the price of DIS stock fell below this level of support, I would exit any long positions and look for the appropriate setups to enter a bearish position.

The following DIS stock chart illustrates the positive development that has occurred after support was tested.


Chart courtesy of StockCharts.com

There were two key bearish signals on the above chart of DIS stock, and now there is only one.

The first bearish signal was stemming from a downtrend line. This bearish trend line is created by connecting the peaks on the price chart. This trend line had effectively rejected the price of DIS stock as it attempted to move higher. Going into the presidential election, DIS stock began to chip away at this trend line, and it has now effectively broken above it. Accomplishing this feat is very significant, as one bearish indicator has now been removed . This is just another win for the bulls.

The second signal stems from the death cross. 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 the current bearish trend is still in force, but the 200-day moving average is now being challenged. A break above this level on the Disney stock chart would be a tremendous victory for the bull camp.

The win will be on two fronts as the death cross can only be negated by higher prices, and trading above the 200-day moving average is required. Stocks that are trading above this moving average are bullish, as the 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When a share price is above the moving average, it is bullish. When a share price is below the moving average, it is bearish.

The bearish headwinds are starting to subside, and the bullish tailwinds are once again beginning to blow.

Bottom Line on DIS Stock

The neutral position I have held on Disney stock is slowly swinging to bullish as my anxieties surrounding this name are starting to subside. I need one more signal to turn bullish, and then I can fully assume a bullish bias on DIS stock.