How To Play Disney's Stock Following Q2 Earnings

Walt Disney Co DIS is set to print its second-quarter financial results after the market close on Wednesday. The stock was trading about 2.4% lower heading into the event.

When the company printed its first-quarter results on Feb. 9, the stock gapped up about 6% the next trading day but ran into a group of sellers and closed that trading session up a little over 3%.

For the first quarter, Disney reported earnings of $1.06 per share on revenues of $21.8 billion, which beat the consensus estimate of earnings per share of 61 cents on revenues of $18.6 billion.

For the first quarter, analysts estimate Disney will print earnings per share of $1.07 on revenue of $18.88 billion.

Disney has plummeted about 47% from its March 8, 2021 all-time high of $203.02 and has declined about 31% this year. On Wednesday, Disney was trading near the 52-week low of 106.14.

From a technical standpoint, Disney looks set for at least a bounce but it should be noted holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders particularly, those who are holding close dated calls or puts, take on extra risk because the intuitions writing the options increase premiums to account for implied volatility. The implied move for options of Disney expiring this week is 9.29%.

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The Disney Chart: Disney has been trading in a steep and consistent downtrend since March 29, with the most recent lower high printed on May 4 and $116.44 and the most recent confirmed lower low formed at the $111.01 level on May 2. On Wednesday, Disney printed a new 52-week low, which may end up being the next lower low in the pattern if the stock reacts positively to its earnings event.

• Disney is likely to bounce up over the next few days because its relative strength index (RSI) is measuring in at about 26%. When a stock’s RSI falls below the 30% level it becomes oversold, which can be a buy signal for technical traders.
• The stock has two higher gaps with the closest between $133.93 and $135.13. Gaps on charts fill about 90% of the time, which makes it likely that Disney will rise up into the empty trading range in the future, although it could be some time before that happens.
• If Disney closes the trading session near its low-of-day price, it could indicate the stock will trade lower again on Thursday. If the stock is able to end the trading session flat, it will print a doji candlestick on the daily chart, which could indicate higher prices are on the horizon.
• Disney has resistance above at $108.50 and $115.76 and support below at $100 and the $92.71 level.

See Also: Pete Najarian Is Bullish On Disney Ahead Of Earnings: Here's What Will Send The Stock Higher