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Earnings season has officially started, and that means there will be increased volatility in the market for the next few weeks.
We try to limit our risk by not holding trades through earnings announcements. So just like with the Costco (NASDAQ:COST) trade we recommended last week, we’re looking to trade on a company without holding it through its earnings report. We don’t do this with every trade, but we have found it to be a successful approach in most cases.
Walt Disney Company (NYSE:DIS) has been a fantastic stock for us this year, and with the recent release of The Lion King and Spider-Man: Far From Home, we think now is a great time to open a new trade.
We’ve successfully completed two bullish put write trades on the company this year, and it’s slowly becoming one of our favorite stocks to trade on.
New Movies and New Markets
The last time we recommended a trade on DIS, we mentioned the success of movies like Captain Marvel, Avengers: Endgame, Aladdin and Toy Story 4. Avengers: Endgame continues to close in on Avatar‘s box office record. The recently released Spider-Man: Far From Home has already earned $847 million globally. DIS’s movie offerings are going to keep bringing in cash for the company.
We also mentioned that DIS is expanding into streaming services. The company now owns a large stake in Hulu, and Disney+ will help increase its dominance in that market. And unlike other companies that wade into streaming services, DIS has money from its movies, TV shows and theme parks to help support a new service.
Resistance at $142 Could Become Support
We frequently mention that old resistance becomes new support, and that seems to be the case with DIS. The stock completed a bullish “wedge” continuation pattern as it broke above horizontal resistance at around $142 last week. Before that, it had been consolidating below $142 for nearly a month.
Daily Chart of The Walt Disney Company (DIS) — Chart Source: TradingView
If $142 becomes new support for DIS, that makes it a good strike price for a put write.
DIS is scheduled to release its second quarter earnings on August 6, after market close. And as mentioned above, that leads to more volatility. We don’t want to get caught in any post-earnings profit taking, so we want to pick an expiration before DIS reports earnings.
To find out which DIS puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.
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