Disney: Bullish Consolidation Analysis 1H (Apr. 21)

21 avr. 2020

X FORCE GLOBAL ANALYSIS:


In this analysis, we explore the bullish probabilities for Disney's case (DIS) based on its bullish consolidating technicals and strong fundamentals.

Technicals

- We see a textbook ascending triangle pattern, which is a bullish consolidation pattern
- An ascending triangle pattern in a downtrend signals a potential bullish trend reversal
- We can count Elliott Triangle Waves (ABCDE), and see that wave E has completed forming as well
- The Relative Strength Index (RSI) shows great strength on the daily, creating higher lows and higher highs
- The Moving Average Convergence Divergence (MACD) also shows increasing bullish histograms on the daily as a sign of momentum

Fundamentals

- When Disney is not aggressively investing into its direct-to-consumer business, it has generated close to $8 billion of free cash flows.
- Disney's balance sheet is strong and affords Disney plenty of flexibility
- With that said, half of Disney’s operating income is generated from its Parks, Experiences and Products segment
- Considering the Parks closed so far and the potential closure of others will have a substantial effect on Disney’s near-term overall profitability
- However, Disney's fundamentals remain exceptionally strong, and the long term picture still remains intact

What We Believe

We believe that Disney is an impressive business, with broad diversification, expected to grow consistently over the medium-term. While this company was hit by the Corona Virus (COVID-19) more severely so than other companies, technicals demonstrate potentiality for a breakout, leading to a small bullish rally.

Trade Safe.