Disney Is Up Just 4% YTD. What Its Chart Says Ahead of Earnings

The "House of Mouse" plans to roll out results ahead of the opening bell on Thursday for the three months ended roughly Sept. 30.

Wall Street expects DIS to report an adjusted $0.85 per fully diluted share on about $22.8 billion of revenue for the period. That would represent a 25.4% drop from the $1.14 in adjusted EPS the company earned in the same period last year, while revenue would have grown 0.9% from the $22.6 billion DIS recorded in fiscal Q4 2024.

In fact, only three of the 22 sell-side analysts that I know of that cover Disney have revised their earnings estimates higher since the quarter began, while 13 have cut their numbers. (The remaining six analysts made no changes.)

But beyond analysts, many economists will also be watching Disney's earnings for signs of the U.S. consumer's financial health.

After all, Disney's results could serve as an economic bellwether given that consumers might splurge on the company's theme parks and movies -- or skip them altogether depending on someone's individual finances.

So far, signs for the overall leisure-and-hospitality sector aren't all that encouraging, with the most recent employment reports showing decreased labor demand across the segment.

Now check out Disney's chart going back some five months and running through Friday afternoon:

Readers will first note that DIS peaked early this summer, creating a double-top pattern of bearish reversal marked with a jagged red line and red box at left above.

The stock then went into a long falling-wedge pattern, marked with blue diagonal lines and a blue box in the chart's center and right. This is considered a pattern of bullish reversal, but the falling wedge's two trendlines appear to be coming together only very slowly.

As Disney shares have worked their way lower over the past 4+ months, the stock has appeared to hit resistance at its 50-day Simple Moving Average (or "SMA," denoted by a squiggly blue line). However, the stock seems to have also found support at Disney's 200-day SMA (the red squiggly line above).

Looking at the secondary technical indicators that I most often follow, Disney's Relative Strength Index (the gray line at the chart's top) has been weak, but continues to work its way towards something closer to neutral.

However, the stock's daily Moving Average Convergence Divergence indicator (or "MACD," marked with black and gold lines and blue bars at the chart's bottom), isn't saying much at all.

The histogram of the stock's 9-day Exponential Average (or "EMA," marked with blue bars) seems to be sitting very close to zero and never straying very far.

Similarly, Disney's 12-day EMA (the black line) and 26-day EMA (the gold line) appear to be running together. The bulls would be rooting for the black line to overtake the gold line, but the fact that it hasn't (and that both of them are running below zero) is mildly bearish.

As I write this, the options market looks to be pricing in an approximate 7% move for Disney's stock following its upcoming earnings.

Options traders with no directional bias might employ what's called a "short strangle" in this scenario because they're hoping to take advantage of so-called "intrinsic-value crush (or "IV crush").

These traders are selling potentially unlimited risk for a premium, and are willing to take a short or long equity position should the stock move more than expected. Here's an example:

-- Sell (write) one DIS $119 call with a Nov. 14 expiration date (i.e., after this week's earnings come out). This was priced at about $1.36 as I wrote this column.

--- Sell (write) one DIS Nov. 14 $103 put for roughly $1.33.

Net Credit: $2.69.

This example has three potential outcomes at expiration:

-- Should the stock's price end up between $103 and $119 at expiration, the trader would simply pocket the $2.69 net credit.

-- Should Disney trade above $119 at expiration, the trader would end up short 100 DIS shares at a $121.69 net basis.

-- Should the stock trade at or below $103 at expiration, the trader would end up long 100 DIS shares at a $100.31 net basis.