Stock Of The Day: Disney Buyers Get Aggressive After Breakout, Setting Up Next Move
Shares of The Walt Disney Company (NYSE:DIS) continue to rally on Thursday after a more than 10% increase on Wednesday. It was driven by news that the company posted stronger-than-expected growth, in part due to demand at US theme parks.
The announcement caused the stock to break out, and now it may even be getting close to another breakout. Benzinga’s team of expert technical analysts has made it our Stock of the Day.
Stock rallies tend to end or halt when they reach resistance levels. These are price levels or narrow zones where there is a large amount of sell interest.
If a market is trending higher there aren't enough sellers to fill the orders of the buyers. Investors and traders who wish to purchase shares are forced to outbid each other and pay premiums if they want to acquire shares.
This forces the market into an uptrend.
But when it reaches resistance, there is enough supply to satisfy all of the demand, and the price stops moving higher.
Read Also: Forget Rate Cuts This Year, Bank Of America Warns After Powell’s Hawkish Tone
Resistance can form in markets because of buyer's remorse.
As you can see on the chart, there was resistance for Disney around $101.65 in March. The rally ended at this price and the stock reversed and went lower.
When this happened, many of the people who bought at that level regretted doing so. Some vowed to exit their positions at breakeven if they could eventually do so.
So, when the stock rallied back to that price, these remorseful buyers placed sell orders. There were enough of these orders to form resistance at the price again. This is why the move higher stalled at this level on Wednesday.
But the news made Disney break this resistance.
This indicated that the sellers who created the resistance were out of the way. With this supply off the market, buyers had to get aggressive and the stock made a big move higher.
Now the shares have encountered resistance around $106.50. There is resistance here because of buyer's remorse as well.
Remorseful buyers who purchased shares at support around $106.50 in January are selling. This has caused resistance to form.
If the buyers can overpower the sellers, as they did at the $101.65 level, another big move higher may follow.
Read Next:
Photo: kovop/shutterstock