Walt Disney Co (NYSE:DIS) gapped down on Tuesday and then entered into a volatile trading period, falling about 2.7% and then rallying 1.85% before settling down again to close at $131.75.
The volatility was in sympathy with the general markets, where the SPDR S&P 500 ETF whipsawed between $415.12 and $427.21 intraday due to geopolitical uncertainty caused by the Russian invasion of Ukraine, which on Tuesday resulted in the U.S. administration announcing it will ban Russian oil and Ukraine President Volodymyr Zelensky attempting to placate Russia by announcing the country will no longer seek to join NATO.
On Tuesday, it was reported Disney plans to push into sports betting to revitalize ESPN, which has a shrinking subscriber base. The company believes it will be able to target a younger user base with the ability to add gambling to their sport-viewing experience.
While the move into sports betting may attract a wider audience, Disney is alienating other employees and customers with its refusal to speak out against the proposed “Don’t Say Gay” legislation in Florida, with a growing number of voices calling for a boycott of the company. The legislation aims to ban discussions of sexual orientation and gender identity in schools prior to the third grade.
Disney entered into a downtrend on Feb. 10, the day following its first-quarter earnings beat, where the company reported earnings per share of $1.06 versus an estimate of $0.61. Since that date, the stock has declined over 15% lower but has started showing signs a bounce may be in the cards.
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The Disney Chart: Disney is trading in a confirmed downtrend, making a fairly consistent series of lower highs and lower lows. The most recent low was formed on March 1 at the $143.78 level and the most recent lower low was printed on Tuesday at the low-of-day at the $129.26 mark.
- The volatile price action on Tuesday has Disney looking to print a long-legged doji candlestick on the daily chart, which indicates the temporary bottom may be in and a bounce to the upside is in the cards for Wednesday.
- Disney’s relative strength index (RSI) is measuring in at about 31%, which also indicates a bounce may come. When a stock’s RSI nears or reaches the 30% level it becomes oversold, which can be a buy signal for technical traders.
- Tuesday’s wick up from the low-of-day, when combined with similar price action on Jan. 24, has caused the stock to print a possible bullish double bottom pattern at the $129 level. If the pattern is recognized Disney is likely to trade higher over the coming days.
- Disney has resistance above at $137.14 and $141.87 and support below at $132.38 and $129.42.
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