As Disney (DIS) approaches meaningful resistance, it is a good time to evaluate if the run in Disney looks in trouble here. In other words, should we be buying the toy story or moving to the monorail heading for the parking lot?
As price started to accelerate in November, the SCTR is giving us a clue that something is changing in Disney stock. After being mired in the basement with an SCTR of 10, the SCTR rallied up to 65. Now it has pulled back again. This suggests that the stock is weak, but one of my favorite multi point setup signals on the SCTR is:
- a breakout from the low levels suggesting improved investor interest (Nov, Dec)
- the SCTR relaxes but does not drop to the same level (January)
- the stock and the SCTR goes on the start of a big run (we are waiting!)
Lets evaluate the chart with this setup in mind. The stock price keeps banging it's head on resistance. That is bullish. The overall stock market has been soaring, so even keeping up right now is difficult. Money is rapidly moving around trying to find outperformance. The daily MACD is well above zero, but is pulling back gently. That's an ok situation. Lastly, the On Balance Volume looks set to break to new highs. That is very bullish.
If this huge bull run is going to correct, we could probably expect large cap stocks with high visibility to do well. Disney would fall in that camp.
The weekly chart of Disney also provides some compelling setup information, so lets look at that.
The price setup on the weekly couldn't be more acute here for 5 technical reasons.
- The three-year resistance line on price
- The major uptrend of lows is still rising
- The weekly PPO has a 5-year downtrend in momentum
- The weekly PPO has rising lows for the last 2 years (along with the market!)
- The last two weeks of the PPO shows slowing momentum (rolling over?)
The SCTR setup on the big picture also shows why caution should be employed here. In the first three years on the chart, DIS had an SCTR rarely below 50. The last two years, it has had an SCTR below 50 for 6 quarters and above 50 for 2 quarters. Hardly showing signs of strength! But a trend change starts somewhere, and we have all the setups in place for that to happen.
Here is what I would watch for as a technician:
- I want to see price break and hold above the trend line. Disney reports February 6th, 2018. That could be the catalyst either way.
- I do not want to see the PPO roll over here. It needs to break the long term downtrend in momentum. If it can't do it with the recent market euphoria, when will it be able to?
- $100 is a hard line in the sand to the downside. $95 might be the fall back support, but a broken uptrend of lows in a gigantic bull market would be concerning. (See the GE chart for how that turned out!)
We do know that Disney is embarking on a new streaming platform and pulling their content from some of the other streaming services like NFLX. That's a big deal.
The catalysts are in place for this chart to break out. I would never bet against the momentum of the mouse house, but the investor momentum is how we get paid. Watch closely as this is when momentum in the Disney stock movie changes for better or for worse.
I authored an important blog about the $USD this week. The Dollar Gets Bucked Off! Feel free to click the follow button for the Commodities Countdown blog if you would like more intermarket analysis!
Here is the weekly video that discusses the current state of the bull market, the importance of the currency moves this week, and the resulting effects on Commodities.
Greg Schnell, CMT, MFTA