Trading Strategies for Disney Stock Before And After Q1 Earnings

Walt Disney Company DIS was trading flat Wednesday heading into its first-quarter financial report after the market closes.

When the Mouse printed its fourth-quarter results on Nov. 8, the stock plunged over 13% the following day but rebounded about 18% over the eight trading days that followed.

For the fourth quarter, Disney reported adjusted earnings of 30 cents per share on revenue of $20.5 billion. The company missed the EPS estimate of 56 cents on revenues of $21.5 billion.

For the first quarter, analysts estimate Disney will print earnings per share of 78 cents on revenues of $23.37 billion. Traders and investors will be watching closely to see whether Disney has been able to continue growing Disney+ subscribers in the wake of Netflix reporting new subscriber figures that came in ahead of analyst estimates.

On Jan. 31, Macquarie analyst Tim Nollen maintained an Outperform rating on Disney and raised the price target from $110 to $122. The new price target suggests about 10% upside for Disney.

From a technical analysis perspective, Disney’s stock looks set to trade higher over the coming days because the stock has settled into a bull flag pattern on the daily chart. It should be noted that 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.

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The Disney Chart: Disney reversed course into a steep uptrend on Dec. 29, flew through the 200-day simple moving average (SMA) on Jan. 23 and continued higher before topping out at $113.53 on Feb. 2. Since then, Disney has been consolidating mostly sideways.

• The steep surge north paired with the consolidation has settled Disney in a bull flag pattern on the daily chart. The measured move of the pattern, if Disney breaks up from the flag following a positive reaction to its earnings print is about 33%, which suggests the stock could reach about $143, although pullbacks would likely come along the way.
• If Disney suffers a bearish reaction to its earnings and falls under its most recent higher low of $108.53, which was created on Monday, the stock’s uptrend will be negated and a downtrend could be in the cards.
• If that occurs, bullish traders can watch for the stock to form a possible bullish reversal candlestick, such as a doji or hammer candlestick, near the 200-day SMA. If Disney loses support at that level, a longer-term downtrend could take place.
• Disney has resistance above at $115.76 and $120.61 and support below at $108.50 and $100.90.

Photo via Shutterstock.