Disney's Stock Needs The Magic Of Volume: A Technical Look Ahead Of Earnings

Walt Disney Co DIS is set to release its second-quarter 2021 earnings on Thursday after the bell.

With Disney’s parks closed or operating with reduced capacity during the reporting period and its ships docked, all eyes will be on whether the company has been able to grow its streaming service.

When Disney printed first-quarter 2021 earnings on Feb. 11, it reported revenues of $16.25 billion, versus the consensus estimate of $20.86 billion. Disney’s adjusted earnings per share came in at 32 cents compared to the estimate of a 38-cent loss.

The day following Disney’s earnings report its stock gapped up 1.36% but immediately sold off and closed the day down 2%. Disney’s stock had run 17.3% in the 12 days leading up to its earnings report, however, and when a stock runs up into a known even it often sells off after the event, regardless of whether the news is positive or negative.

Disney’s stock has not run up into Thursday’s earnings event and if Disney posts better than expected results, the share price could rise but there are gaps below to be aware of.

See Also: Morgan Stanley Analyst Explains Disney Price Target Increase Ahead Of Earnings

The Disney Chart: On Wednesday, Disney lost a key level of support at $182.79 amid general market weakness. On Thursday, Disney tried to regain that level but it has now become resistance and the stock wicked from it and closed below.

Disney’s stock printed a bearish red inverted hammer candlestick on Thursday and, with its upper wick, indicates there are sellers above near resistance. The stock also has two gaps below at the $128-$133 and $158-$160 areas. Since gaps fill 90% of the time, it's likely Disney’s stock will revisit those levels in the future although it's more likely the higher gap will fill than the lower gap.

Disney's stock has been in a long but slow decline, making lower highs and lower lows, after making a new all-time high of $203.02 on March 8 and desperately needs bullish volume to come in for a reversal back up.

Disney is trading below the eight-day and 21-day exponential moving averages (EMAs) and the eight-day EMA is trending below the 21-day EMA, both which are bearish indicators. Disney is trading above the 200-day simple moving average, however, which indicates overall sentiment in the stock is still bullish.

Bulls want to see a positive reaction to Disney’s earnings and for bullish volume to pop the stock back up over the $182 area to regain the eight-day and 21-day EMAs. If Disney’s stock can trade back above those levels, it has room to move back up towards $191 before meeting its next resistance.

Bears want to see large bearish volume continue to pressure Disney’s stock to the downside. If the stock can't hold its support level at $171, it could drop down to fill the gap at $148.

DIS Price Action: Shares of Disney were up 0.6% to $178.95 at publication time.