Chart Wars: Between Disney And Netflix, Which Stock Will Bounce First?

Walt Disney Co DIS and Netflix, Inc NFLX have been trading in long-term downtrends that recently brought the stocks to 52-week lows of $129.26 and $332.30, respectively.

The downturn was accelerated when news hit Feb. 24 that Russia had invaded Ukraine, and both stocks have fallen over 9% since that date.

Inflation concerns have also weighed heavily on the market and traders and investors will be watching to see how the Federal Reserve plans to handle the soaring costs of living when it releases its monthly minutes on March 17. It is widely expected Fed Chair Jerome Powell will announce a 25bps interest rate increase, but if that number goes higher or if the Fed decides to hold off on hiking rates, volatility could increase as the market attempts to price in unexpected information.

For now, both Disney and Netflix are bearish, as neither stock is showing signals the bottom may be in. A short-term bounce is likely on the horizon, as Disney and Netflix are entering into oversold territory.

It should be noted that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't," and any trader in a position should have a clear stop set in place and manage their risk versus reward.

In The News: Last week, Netflix said it had no plans to include an ad-supported tier to its streaming service and is instead focused on improving its service to generate long-term revenue. Disney, which already offers an ad-supported tier on its Hulu service, said it would begin offering an ad-supported option on its Disney+ service in the U.S. this year, with plans to expand the service internationally in 2023.

Offering an ad-supported option could help streaming services grow their subscription base because the tier can be offered at a discount to commercial free tiers.

See Also: Rumor: Is Disney About To Make A 'Big' NFT Acquisition?

The Disney Chart: Disney is trading in a confirmed downtrend, with the most recent lower high created on Friday at $136.16 and the most recent lower low printed at the $129.42 level on March 8.

• On Monday, Disney gapped down to open the trading session but bulls came in to buy the dip, which caused the stock to trade up to fill the gap, which may give bears more confidence going forward.
• The stock is likely to bounce over the coming days because the relative strength index (RSI) is measuring in at about 31%. When a stock’s RSI reaches or falls below the 30% level it can be a buy signal for technical traders.
• If Disney falls below the March 8 low-of-day, a move to the downside could accelerate because the stock has not traded below the level since Nov. 6, 2020.
• Disney has resistance above at $132.38 and $137.14 and support below at $129.42 and $126.53.

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The Netflix Chart: Netflix has been trading in a steep downtrend since Nov. 17, when the stock reached a new all-time high of $700.99. The most recent lower high was formed on March 10 at $367.02 and the most recent lower low was being created on Monday at the low-of-day.

• Like Disney, Netflix will eventually bounce up because its RSI is measuring in at just above the 30% mark.
• Netflix has a large gap above between $458.48 and $506.93. Gaps on charts fill about 90% of the time so it is likely the stock will rise up to fill the range in the future, although it could be a considerable amount of time before that happens.
• Netflix has resistance above at $337.95 and $352.40 and support below at $323.60 and $307.85.