Friday, January 16, 2015

DIS Walt Disney Weekly Chart Overbot Rising Wedge Negative Divergence Doji Price Extended Strong Upside Trend is Lost

Typically you want to avoid shorting momentum stocks that climb like the Mouse House has but Walt Disney is ready for the rest home. Traders and investors, especially retail sucka's, are caught up in the Disney hype and tripping over each other to buy DIS. Pundits are telling Ma and Pa to buy DIS and sending them into a buzzsaw. The fantastic pipeline of movies is touted as a future catalyst but everyone knows all this already and price has already ran up on the happy projections for the next year including robust attendance at theme parks.

Price is extended above the moving averages and desperately needs a mean reversion (selling). The rising wedge, overbot conditions and negative divergence (red lines) predict nasty things ahead. The current candlestick is a doji indicating a potential trend change on tap. The pink box shows that the strong two-year trend ended three months ago (the ADX drops under 25-ish). The thought is that selling will enter Disney in the weeks and months ahead and the ADX will likely rise above 25 again indicating that  downtrend is the new strong trend through 2015.

The monthly chart shows a long and strong MACD line and RSI so after DIS drops for a month or two, price will likely want to come back up again for a month or so, then the multi-year top for DIS will be in place. There is no reason to own the stock going forward especially if you have large gains. Take the money and run. The upside is limited here forward but the downside is open to the 75-90 area this year. A momo move like this may take the better part of the first half of this year to roll over with the main takeaway being the absence of any further significant upside from here.

Considering the wee bit more juice on the monthly chart, the expectation would be for DIS to sell off now, perhaps back down to the 20-week at 90, then back up again to current prices then roll over for an extended selloff; this jog move may take a few weeks and one to four months to play out. If you decide to remain long, you will ride DIS lower for a few weeks hoping for a bounce. You will receive the bounce and price will likely give you a second chance to exit so do not pass up that exit chance if you plan on trying to ride it out further.

DIS was an epic winner in 2013-2014 but time to take the money and do not look back. Look elsewhere for opportunities or simply let that money sit in cash for the next few weeks. Snow White, Dopey, Goofy, Pluto and even Donald Duck will all be sad as the year plays out drowning their troubles at the Magic Kingdom bar. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Saturday, 1/17/15: DIS announces CEO Robert Iger's compensation after everyone already left for the weekend. Iger takes +27% more from the kitty over the last year a total of $43.7 million compared to $34.3 million last year. He is gittin' his while the gittin' is good.

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