So I'm flipping through charts this week and I come across the daily chart of Walt Disney Co ($DIS). Following my traditional chart approach, I start at the right side of the chart to see where the price is at now related to its previous moves. Higher highs and higher lows, clear uptrend.
I then look for any patterns and I see a beautiful cup and handle pattern, with a long rounded bottom, then a shallow correction after it reaches the resistance level of the pattern, then a solid breakout to the upside.
I'm then struck by the stepwise motion of the stock trading higher and higher. It's as if a series of handles have attached themselves to the coffee cup.
Any potential issues? Bearish divergence from RSI (top panel), similar to what I see on the $SPX chart and many other names as well. Not a disaster, but certainly a red flag to keep an eye on how the chart proceeds from here.
How do we think of a chart like this? The consistent uptrend suggests buyers pushing the price higher, willing to pay more for $DIS over time. The best part is there are clear support levels, with each of the series of higher lows providing a perfect price point at which to revisit a long position.
Up and to the right? Good.
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