Pullback Planning for Disney DIS Ahead of Earnings

Feb 7, 2017: 3:08 PM CST

Disney (DIS) reports earnings after the closing bell today.

Let’s study the set-up – a pullback or breakdown – that would likely trigger as we step into Wednesday.

Here’s the current uptrend and two prior pullbacks for Disney shares:

First, Disney (DIS) shares formed a reversal off a positive divergence and kick-off in November.

From there, we’ve seen shares rise from the $90.00 level to the current peak into $112 per share.

We can see two successful – if not textbook – pullback/retracement (bull flag) trades in January.

These are great examples from our ongoing Perfect Pullback Lesson series that help you understand this concept quickly and in more detail.

While we’re seeing a clean, persistent uptrend in price (which we want to see), we’re seeing cracks in the foundation.

What do I mean by that?  Look at both Volume and Momentum.

Both metrics are declining as price rallies which sets up a persistent negative divergence.

That’s a non-confirmation and it reduces the odds of additional upside price action; it increases the odds of a steeper pullback (sell-swing).

In fact, price is poised exactly at a critical pivot of the rising 20 day EMA.

What will happen next?!

Ultimately, that’s your trade and it could trigger tomorrow.

A bullish rally up away from the 20 day EMA sends price at leats to the prior high.

However, a downward break under this level near $109 suggests price could travel down to the lower target of the rising 50 day EMA near $106.

Either way, plan your trade based on the departure from the current level – the rising 20 day EMA.

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Corey Rosenbloom, CMT

Afraid to Trade.com

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