Is Disney Ready to Entertain Your Portfolio?

With shares of Disney (NYSE:DIS) trading around $54, is DIS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Technicals on the Stock Chart are Strong

Taking a look at Disney’s (NYSE:DIS) price chart, one can see that it is in a magnificent uptrend consisting of higher highs and higher lows. Besides confirmation of the stock’s price what better confirmation of a market leader is there? The leading diversified family entertainment and media enterprise’s stock is trading near all-time highs. In fact, it broke out to all-time highs this year but has just recently pulled back about 3 percent into a zone of consolidation.

In a strong uptrend, a stock should be trading comfortably above its rising key simple moving averages. Disney is trading above its 50-day, 100-day, and 200-day simple moving averages and is consolidating around the 20-day. The rising moving averages are also stacked in consecutive order in textbook form, offering more confirmation of a strong  uptrend.

The implied volatility of Disney options is at 22.25 today, which coincides with a 40th percentile over the last 30 trading days. Keep in mind that the implied volatility over the last 30 trading days was also affected by earnings. The implied volatility skew of March put options is fairly steep while call options are relatively flat. What does this all mean? This means that there is low demand from call buyers or high supply of call sellers while there is high demand for put buyers and low demand for put sellers, all neutral to bearish in the short-term. The options market isn’t always correct but further consolidation may be ahead in the short-term. Once the consolidation is completed, look for the stock to head higher.

E = Earnings Are Increasing Quarter-Over-Quarter

A primary driver of rising stock prices are…(conclusion on next page)