We have not looked at the charts of Walt Disney Co. (DIS) in a few months so we decided to check things out today ahead of the release of The Lion King this week.
In the daily bar chart of DIS, below, we can see that prices have worked higher since late March. The big upside price gap and heavy volume in April marked a new uptrend for the iconic entertainment company. Prices are above the cresting 50-day moving average line. The slower-to-react 200-day moving average line still shows a positive (bullish) slope.
The On-Balance-Volume (OBV) line made a new high for the move up this month to confirm the price gains. The 12-day price momentum study in the lower panel shows weakening price momentum from April to June to July even as prices have made higher highs. This difference between the price action and the indicator is a bearish divergence and tells us that the pace of the acceleration has been slowing and this can sometimes foreshadow a correction.
In the weekly bar chart of Action Alerts PLUS holding DIS, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line shows weakness the past three months and suggests that some investors may have been using the price strength to take profits.
The weekly Moving Average Convergence Divergence (MACD) oscillator is above the zero line in bullish territory but the two moving averages that make up this indicator have been narrowing and telling us that the trend strength is weakening.
In this Point and Figure chart of DIS, below, we can see an upside price target of $207 being projected. A decline below $136.63, however, will likely turn the chart a little bearish.
Bottom-line strategy: Prices have moved higher the past three months but price momentum has slowed. While the trend is still up and the daily OBV line is bullish, we want to think about defense as prices discount the future. I would raise sell stop protection to a close below $136.