Before I get to other updates today, I want to start off with an update on the Disney Trade (DIS). The Walt Disney Company (DIS) has been basically underperforming the general market for several months now. Is Disney’s Kingdom, and maybe more importantly its stock, still magical?

Disney’s underperformance, when analyzed on this next 5 year monthly candlestick chart, shows that DIS has been building a longer base than anticipated. I originally thought a Zig-Zag wave pattern ended Disney’s correction at the time and it was ready to begin its next leg upwards. But the Zig-Zag wave pattern as it turns out was just the first part of a longer correction period.

Typically, the longer the consolidation period is the longer the breakout period is. Let’s re-analyze the Disney trade (DIS) from both a shorter and longer term perspective.

Disney Trade (DIS) – Revisited

This first chart is a 5 year monthly candlestick chart. Disney’s share price has been forming a Symmetrical Triangle wave pattern over the last 2 year period.

Here is an illustration of a Contracting Triangle with the corrective waves (Waves A-E) labeled. Contracting Triangles are also called Symmetrical Triangles.

Most times Triangle patterns act as continuation patterns, meaning the continue the trend that was in place before the development of the Triangle pattern. But from an Elliott wave perspective, the Triangle pattern has a very specific meaning.

After a long uptrend, Triangle wave patterns[s2If !current_user_can(access_s2member_level1)]….

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I review the 2 most probable price target areas for Disney’s share price over the longer-term. In addition, I illustrate Disney’s share price action from an Elliott Wave perspective. Elliott waves are excellent price predictors.

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)] help to identify Wave 4 in the largest Bullish Impulse Wave on a chart.

DIS – Elliott Wave Breakdown

So what does Disney’s largest Bullish Impulse wave pattern look like? I am going to step back and look at a 20 year monthly chart for this analysis. This is how I would label Disney’s largest Bullish Impulse wave pattern.

So what can be expected for Disney’s share price for Wave 5, the last wave in a Bullish Impulse wave pattern? Out of Waves 1, 3 and 5, two of the waves are usually identical in length. So far, Waves 1 and 3 on Disney’s chart are of different lengths.

If Disney’s breakout were to emulate Wave 1, it would be an approximate 2 year breakout period. Obviously, we would want Disney’s share price to emulate Wave 3 instead. If Wave 5 were to develop similar to Wave 3, a 4 year breakout period for Disney’s share price should ensue.

The Disney Trade (DIS) – Summary

For those that entered into the Disney trade a little early like I did for my mom’s portfolio, the outlook for a breakout remains. Use any pullbacks to the lower trendline of the Triangle wave pattern to make a scale-in purchase of shares to add to any positions or to initiate a position for the anticipated breakout.

If the NASDAQ does breakdown in the next week or two and develops the Expanded Flat wave pattern that I’ve discussed, it is possible that a short-term Bear Trap develops. A Bear Trap would involve a short-term break below the bottom support line for the Triangle wave pattern. Just something to note in case this market rebound does not last over the next week or two.

From an overall Macro perspective, Disney should not be breaking out unless the health of the overall market is ok. Maybe though, just maybe, Disney gave us an early preview of what the major indices might be doing. Developing into a longer-term consolidation period and sideways trading range. I will discuss the NASDAQ setups in the forum.

Ask away with ay questions below or in the Idea Chamber!

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