From the Trading Floor: Why I Didn't Play Walt Disney Co (DIS)

Why a Schaeffer's trader rejected a bearish recommendation on Walt Disney Co (NYSE:DIS) stock

Dec 9, 2016 at 3:44 PM
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Our traders are stalking a lot of different stocks throughout the week, but not every potential trade idea develops into a formal recommendation to our subscribers. Whether it's the break of a key technical level, an unexpected news announcement, or an unfavorable options pricing environment, this regular feature will shed some light onto the factors we view as "dealbreakers" to otherwise intriguing trade setups. Today, Schaeffer's Senior Equity Analyst Joe Bell, CMT, chimed in on one stock he was toying with -- but ultimately rejected -- for a bearish recommendation in late November: blue-chip media monster Walt Disney Co (NYSE:DIS).

Specifically, Bell initially liked the stock's rejection at the round-number $100 level. Plus, at the time there was heavy call open interest in the December series, he noted, which can often serve as options-related resistance. In the past two weeks, more than 16,000 100-strike calls have been liquidated, when looking at both weekly and standard monthly options expiring in December.

DIS OI Dec 9

However, Bell acknowledged that Walt Disney Co (NYSE:DIS) stock has been showing great momentum recently, which is why he ultimately rejected a bearish rec. "The stock's 20-day and 200-day moving averages made a bullish cross, and DIS has been holding steady above the latter trendline for its longest stretch since last November," he said. DIS could be on its way to taking out its May highs in the $107 area, with the shares last seen 0.7% higher at $104.13. Meanwhile, Barron's named the blue chip one of its top picks for 2017.

DIS chart Dec 9

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