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

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, 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.

On 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 event, 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.

The Disney Chart

On Wednesday, Disney lost a key level of support at $182.79 amid general market weakness. Disney’s stock printed a bearish red inverted hammer candlestick on Thursday and, with its upper wick, has been indicating 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 rather than the lower gap.

Disney's stock has been in a long but slow decline, making lower highs and lower lows after reaching a new all-time high of $203.02 on March 8, and it 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 of 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.

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