Walt Disney (DIS) High Confidence Trade Set-Up

This article is for the Walt Disney Company (DIS) post-earnings analysis and a high probability trade set-up that I see developing over the next month or two.

After selling all of my mom’s shares for DIS about 2 weeks ago now, I have been waiting for a chance to re-enter the trade on her behalf. My main thesis was to purchases shares on a pullback to the 200 Day moving average. Especially since Disney’s share price had just developed a Golden Cross on its moving average charts. More on that later in the article.

I still haven’t received any member updates on the new Star Wars movie yet. Sparky, where’s my review? I have heard though that it did well at the box office and was pretty well received. The Star Wars franchise will always hold a special place in my heart.

With earnings announced yesterday after the market closed, I think the opportunity to jump on Disney’s trend is near. There was some initial weakness with the share price in the after-hours market activity last night. And after an attempted rebound during today’s trading, the Walt Disney Company (DIS) is a company that should potentially be on your watchlist.

DIS – Post-Earnings Analysis

Three months ago, the Walt Disney Company (DIS) had a lackluster earnings report. The stock rallied on the report up until its most recent one yesterday. Yesterday, DIS had another ho-hum earnings report. They beat on earnings but missed on top-line revenue. That was enough for the share price to see a little selling pressure today.

Actually, without making a new high for the uptrend before beginning to pull back could be an indicator that a consolidation period is underway. If the share price makes a lower low tomorrow, that should further confirm the consolidation.

As Disney’s share price has rebounded over the last 3 months, I like how it has moved back above the 50% Retracement Line from the downtrend. If most of DIS’s consolidation takes place above the 50% Retracement Line on this chart the probability of a subsequent breakout is increased.

The gray shaded box represents a less risky area to join the current uptrend for DIS share price. The sooner the share price gets to the gray shaded box though, the better the chance any rebound will fail. A quick move to the gray shaded box is most likely only a quick trading opportunity.

For no other reason than a hunch, I think Disney is going to develop a Double Zig-Zag wave pattern during its consolidation. Double Zig-Zag wave patterns are supposed to be kind of confusing with a bunch of volatility. But that volatility will be skewed downwards.

My estimate for the end point of the Double Zig-Zag wave pattern is around the $103.50 area, near the bottom of the gray shaded box.

DIS – Elliott Wave Breakdown

This is a 1 year daily candlestick chart where I’ve illustrated a potential Bullish Impulse wave pattern for the Walt Disney Company (DIS) during its recent uptrend, including several subdivided waves within Wave 3 of the Bullish Impulse wave. I also illustrated what general shape a Double Zig-Zag wave pattern might look like and just how Disney’s share price might get back to its supporting trendline.

Like most Bullish Impulse wave patterns, this one had an extended wave. The extended wave for DIS developed in Wave 3. I show how the extended Wave 3 subdivides with the red trendlines. An extended wave pattern is basically a mini Bullish Impulse wave pattern within that wave. Wave 3 of the red trendlines can even be subdivided into another Bullish Impulse wave pattern, which I did with the blue trendlines.

The same pattern develops and plays out on many levels. And the further that I can subdivide the pattern like I have, the more confidence I have with the wave breakdown.

It is important to have confidence in your wave breakdown. But the great thing about Elliott Waves is that there is always a definite point when you know hen you are wrong. When a pattern makes a print it shouldn’t. That is the first indication that your Elliott wave pattern may not be labeled correctly. If my above Elliott wave breakdown for the Walt Disney Company (DIS) is accurate, which I think it is, then[s2If !current_user_can(access_s2member_level1)]……

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I look at some pullback areas to begin building a position in the stock as well as some of its upside target prices that can be anticipated after your position has been built.

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look no further than the above chart to re-enter the DIS trade.

You may consider using your 1st scale-in purchase as a core position. to leave until some upper targets are reached while using the 2nd and 3rd scale-in purchase as a trading mechanism.

“Wave 4 of the extended Wave 3” is the red Wave 4 on the above chart. The bottom of the red Wave 4 is $103.87.

This Elliott Wave information can be used to make a purchase right near the bottom of the pullback, every investors dream. Well, dreams do come true. In this case, I will probably use 2 purchases rather than 3 in total when scaling into a position for my mom and possibly myself. I never recommend going “all-in” as nothing is ever certain. But this could be as close as it gets.

Always scale-in, scale-out. I will still scale-in, but only with 2 purchases this time.

DIS – Fibonacci Tools

This is a 6 month daily candlestick chart for DIS with a Fibonacci Fan Tool and a Fibonacci Retracement Tool overlaid on it. The gray shaded box is the ideal area from these tools to look for an entry point. For more details on each tool, refer to their specific webpages under the Charting Tools menu.

A 50% Retracement looks ideal and would push down towards the bottom of the lower quadrant of the Fibonacci Fan Tool, a preferred purchase area when using the tool to enter a trade.

DIS – The Golden Cross Trade

Now let’s discuss the Golden Cross pattern that developed on the chart for the Walt Disney Company (DIS). This is a 1 year daily candlestick chart with moving averages overlaid.

One trade set-up that I have seen be very successful is to go long shares on the very 1st pullback to the 200 Day moving average after the development of a Golden Cross pattern. That trade set-up may be in the process of playing out.

In another month or so of DIS’ share price probably grinding and moving mostly sideways to slightly down, its 200 Day moving average should catch up and be closer to the $103 area.

I have pointed out this set-up a couple of times before. Use the search box for the website and enter “Purchase Shares on 1st Pullback to the 200 Day Moving Average After the Development of a Golden Cross” in the search box. It will find some of the other stocks with the same trade set-up and you can then investigate the results of those set-ups. I can assure that you will not be disappointed.

DIS – Upside Price Targets

Assuming a pullback to the $103ish area goes as planned and a rebound ensues, what is the goal? The goal is calculated with 2 Fibonacci Extension Tools in this case. Anchor point #3 for the blue tool is placed on the estimated pullback area of $103.50 which is the same area where a 3 Weeks Tight chart pattern developed for DIS.

The Golden Ratio for Disney’s current uptrend is estimated to be the $138.56 mark based on the $103.50 estimated pullback amount used for Anchor Point #3 of the Fibonacci Extension Tool.

If DIS share price pulls back, finds support in the $103 area and begins to rebound, there is a good chance that the first uptrend and pullback to the $103 area represents a Wave 1 & Wave 2 on a bigger Bullish Impulse wave pattern. Either Wave 3 or Wave 5 of that pattern would get DIS share price up to the Golden Ratio area of $138.56.

For this to happen, the next earnings report will have to be well received and there will have to be other catalysts…I can think of a few….Disney China doing well, the new Avatar theme park area open in May, Disney has a grand line-up of movies for 2017, including another Star Wars movie (yay!)…..those are a couple of possible catalysts….

The move will be relatively swift. From the $103 mark to the $138 mark, it may only be a matter of 3 months. Be ready.

The Walt Disney Company (DIS) – Summary

Based on the agreement of several different technical analysis methods, a long position in the Walt Disney Company (DIS) sure looks like a nice investment for my mom’s portfolio. Heck, I may even trade it a bit on the way up or even buy a small core position around the $103.50 area.

Remember to let the trade come to you. It will happen between now and the next earnings report. But be ready when it does give you the opportunity – there will probably be some sort of negative news near the end of the correction period that dissuades most investors from purchasing shares at the pullback bottom. Don’t get me wrong, that is the buying opportunity.

That is just my guess of how it happens. But how it happens is not what matters. What does matter is watching for DIS share price to find support around the $103.50 area and use that support to begin building your own position in this media company.

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