Buying the Dip in Disney

• Posted by Greg Harmon
• on October 2nd, 2014

Walt Disney, $DIS, has had an amazing trend higher since September 2011. During that time all pullback have been opportunities to buy on the cheap and ride the next wave higher. This current pullback might be the latest opportunity.

The signs are adding up. The Stock has touched the 100 day SMA which has been support over the last year. The intraday reversal Thursday, building a hammer candle, started higher right at the rising trend line. The RSI has reached the lows of prior reversals. This time could be different and it could still fall further. But with a stop against the trend line it is a good reward to risk entry point.

An options trader might also see the potential to let it run further by adding a collar to the stock. By selling the November 90 Covered Calls and buying a November 7 Expiry 85/80 Put Spread, you could give it room to the 200 day SMA below. And that collar can be had for free. That November 7 Expiry also gives you protection through the company’s earnings report expected November 6th. With the collar you are risking about $1 in the stock as long as it stays over 80.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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