Is Walt Disney Co's (DIS) Losing Streak About to End?

Walt Disney Co (DIS) is on the verge of its seventh consecutive daily loss

by Alex Eppstein

Published on Jul 27, 2016 at 2:18 PM
Updated on Jun 24, 2020 at 10:16 AM

This morning, Schaeffer's Senior Quantitative Analyst Rocky White took a look at the impact of winning and losing streaks on stocks. Stated in the most general terms, what he found is that the longer a winning streak, the less likely the chance of another daily win. By contrast, the longer a losing streak, the less likely the chance of another daily loss.

With that in the backdrop, here are a pair of instructive charts, courtesy of White. The first shows a list of stocks that have been up for at least six consecutive sessions (as of Tuesday's close) and, therefore, could be in trouble. The second lists stocks that have been down for at least six straight sessions, and could thus be ready to bounce. To qualify for the study, a stock had to trade at least one million shares per day or have weekly options.

stock winning streaks july 27

stock losing streaks july 27

One name to take particular note of is Walt Disney Co (NYSE:DIS) -- and not just because it's the only Dow stock on the lists. Rather, according to White's study, "the 'sweet spot' to buy a stock for a one-day return is after it falls six to eight trading days in a row. That's where the average return and percent positive top out." This is certainly the case for DIS, which is down 0.3% at $96.42 -- on track for a seventh consecutive loss.

Potentially working in the stock's favor are high levels of pent-up pessimism. In short, if DIS can somehow muster a burst of technical strength following its current cold streak, bears could get spooked -- potentially translating into an additional boost. Specifically, the stock's 10-day put/call volume ratio of 1.16 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the bearishly skewed 85th annual percentile. Likewise, 16 of 24 analysts rate the shares a "hold" or worse.

Of course, a bullish contrarian take is far from guaranteed, considering Walt Disney Co's persistent struggles. In other words, casting aside the current losing streak, the stock is still a long-term underperformer. Year-to-date, the shares have surrendered over 8% of their value, making them the third poorest-performing Dow component.

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