Wednesday, August 11, 2010

DIS Watch

Jim Cramer says buy Disney. The chart says, You sure about that?

Walt Disney Co. (DIS) had a good earnings report after the close on Tuesday, and the market today rewarded that by sinking the stock to more than 3% below the prior close. Person's Proprietary Signal (pps) kicked into bear phase.

DIS $34.30

The fast stochastic also moved below the 80 line to a give a bear signal.

Cramer thinks the market is just wrong to react that way to earnings. That's one approach. My attitude, however, is more along the lines of "It is what it is." Wrong or right doesn't really come into it except in assessing a trade at its close.

DIS has been trading sideways since May in a range of below $36 on the topside and above $30 on the lower end. So the stock at this piont is more of a swing trade unless it finally breaks out on one side or the other.

Since DIS has been on a strong uptrend since March 2009, I would place my money on an upside breakout sometime down the road. The question for me isn't whether to open a bull position on DIS, but when to do it. The chart tells, not quite yet.

On the Person's chart, today's sharp decline carried the stock from slightly above the midline to down below the weekly lower pivot, and the price then retreated to the pivot level.

Person's Table
ppspps openupper pivotlower pivot
DIS $34.30 $34.77 aug11 $35.39 +3.2% $34.32 +0.06%

Reversal Levels
  • $35.41, +3.2%
  • $34.30 <== You are here.
  • $33.02, -3.7%
  • $30.72, -10.4%
Bottom line: I like DIS as a short-term bear swing play, with a downside target of $33 and maybe as low as $31. I also like DIS as a longer term bull play but would delay entry until a reversal from the current decline. This is known as bottom fishing, a practice generally frowned on, but honestly, who can resist it?  

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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