Medium term
Trade view / 28 June 2016 at 10:32 GMT

UPDATE: Time to take profit on the Disney stock short

Trader /
United States
Instrument: DIS:xnys
Price target:
Market price:

On May 12, I offered a trade idea to play the short side of shares of The Walt Disney Company (DIS:xnys). The stock has since declined about 6% and it's time to take at least partial profits in what has  been a well-calculated trade.

As a reminder and for some perspective, note that on the multi-year weekly chart, DIS stock in early May bounced into the big former support line that stretched all the way back to 2011. What was support then became resistance. The May highs also formed an important lower high versus the 2015 double-top highs.

The Walt Disney Company
Source: Saxo Bank

On the daily chart we see that the entire rally off the February lows had the characteristic of a rising wedge that after a brief breakout fake-out move above the red and declining 200-day simple moving average then quickly gapped back below. A few days later the stock was also back below its yellow 50-day moving average, which then acted as resistance. Last Friday following the Brexit vote DIS stock snapped below horizontal support and saw follow-through selling on Monday. 

The stock may see a bounce today on Tuesday but I am taking at least partial profits and may keep a small portion of the short on for possibly further weakness in coming weeks that could see the stock into the very low $90s.

The Walt Disney Company
Source: eSignal

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more


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