Analysis: DIS ABNB SBUX

Chris Versace and Bob Lang close out the week discussing Disney (DIS) , Airbnb (ABNB) , Starbucks (SBUX) and much more.

CHRIS VERSACE: Good morning, Action Alerts PLUS members. I'm Chris Versace with Bob Lang. Katherine Ross has the morning off. Bob, let's go straight to you. The market's open. What are the technicals telling us for how we're going to close out the week?

BOB LANG: Another up day, Chris. It sounds like I'm being a broken record over here. But after a couple

of days that markets pulled back some yesterday and on Wednesday, the bulls are right back in action. The dip buyers came in. And it started to pick up the pieces here.

Again, as we spoke about a week or so ago, we're entering a seasonally strong period for the stock market even with pullbacks that we may have up until Thanksgiving. Those pullbacks have often get gotten bought. And we look for that same sort of thing to happen.

After 10 months of really strong action in the stock market through at the end of October, the odds and the statistics favor that the markets are going to be higher into the end of 2021. So I like the action over here. I know you've been talking about the earnings endlessly for the past couple of weeks. They've been pretty good. And the market reaction to the earnings has been positive as well too.

So with volatility low, we're in a range of the VIX between 15 and 20 right now. We're on the higher end of that range. But right now with volatility rather low right now, people are looking at the equity markets as the place to be.

CHRIS VERSACE: So Bob, you're saying that dip buyers continue to come in. Is there anything that you'd be on your radar screen that would tell you that that may not happen, or something might be different this time around?

BOB LANG: Well, good question. So what I would say is if we break some severe levels of support-- some good levels of support on the markets-- for instance, the S&P 500 has some good support at the 20-day moving average, which comes in about 70 or 80 handles or points lower than where we're at right now.

It's been climbing at a really steep pace for a while because the market's been going up. And so the moving average has been as it pulls off lower numbers on the front end of the 20-day moving average, it's going to rise at a much steeper pace.

That's something I'd be looking for. And then also, if there's some movement on things that outside of the equity markets. So for instance, if interest rates start moving sharply lower or sharply higher. And we're going to have an effect on technology names. If the interest rates on the long end start rising sharply, the opposite end is going to happen if interest rates continue to come down and the yield curve flattens a bit.

So those are a couple of things I'm looking at. We do have another Fed meeting coming up in about 3 and 1/2 weeks. We'll have to see how they respond to the high, hot inflation that we had this week. And we'll have another print of that next month before the Fed meeting. So those are some of the things that I'll be looking for.

CHRIS VERSACE: OK, and as I mentioned, markets are open. Stocks are trading. And while the pace of earnings and economic data is a little light, we actually have some things we'll be watching as Deere and the UAW head back to the negotiating table. And over the weekend, we've got the Dubai Airshow kicking off. We will, of course, be watching that for any developments on the order front for Boeing and what that might mean for other companies in the AAP portfolio, including Honeywell-- excuse me.

Now, as we hinted in yesterday's Daily Rundown, we actually took advantage of the weakness in Disney as an opportunity to add to our position. Bob, why don't you tackle what we were thinking?

BOB LANG: Yeah, so on a chart technical basis, we're down. We're still down a little bit from prior lows. But I'd like to see us consolidate here around the 158 to 162 level. If we can get above that, 162-- 163 level, which I know there's some going to be some excitement.

I don't want to steal your thunder, of course, Chris, about what's happening later today. But I think if we can get above that 163, 164 area, we've got a good chance of getting back to at least to recapture the losses that we had yesterday after earnings came out.

As I mentioned yesterday, I don't think that the earnings, quote, unquote, "miss" was all that much of a miss if you were paying attention to what management team was telling you 6 weeks ago. And when they guided their numbers, maybe the analysts didn't make their adjustments or whatever.

But certainly the shock of yesterday's earnings had a negative effect on the stock and on the market. But I think if we look over time here, Chris, over the next several weeks, I think we'll see some positive action with Disney. If we don't, we will look in terms of cutting it.

We're not going to fall in love with something just because the price action is poor. And we're not going to sit there and wait and hope and pray something moves in our favor. If it's not working, if it doesn't happen, we'll do what we need to do.

CHRIS VERSACE: That's right, Bob. Of course, we're taking a 12 to 18-month time horizon. Look, we're not going to simply whipsaw positions here. That's not what we do. And again, the reason that we were adding yesterday is we understand that from time to time, subscriber numbers for streaming services-- they're lumpy. And it really reflects the amount of fresh content that's been coming out.

And in the case of Disney Plus, it's been a little slow lately. But the company is leveraging Disney Plus today to showcase all of the content that it has coming in the next, not just 12 months, but really the next 2 years as it targets somewhere between 230 to 260 million Disney Plus subscribers. That's roughly 100% higher than where they are.

And I think you would agree, Bob, that our position on the streaming content side is when you look at all the tentpole brands that Disney has, they are here to compete. And we want to enjoy that success with them. Now, Bob, let's move along also this week.

BOB LANG: Chris, I was also going to mention-- I just want to make one comment to the subscribers. Let's remember that in the short term, the markets are very emotional. In the longer term, they're much more rational. So just using an emotional response, like that drop in Disney yesterday, may be a very good opportunity for us. And we think we took advantage of it yesterday.

CHRIS VERSACE: Yes, we did. All right, Bob. Let's follow up on our conversation earlier this week about

Airbnb. We went through the fundamentals. But dig into the chart and tell us what that has to say about why we started this position.

BOB LANG: Yeah, so Airbnb had a huge pop following earnings. And oftentimes what happens, the stock will pull back and retrace some of that move. And it's done that for the past couple of days. And if you take a look at the stock today, actually, it's shooting higher making a run back towards 200 again.

So what I was looking for was can the stock hold this 188 to 191 level, which was a real important spot where buyers stepped in earlier this week. And it seems to have passed that test. And you can see my chart here from yesterday.

I think the stock is going to make a nice, slow, steady rise back up to 200, back up a little bit higher to the old highs which were somewhere between 217 to 220 from last year-- earlier this year-- excuse me. And I think that if you take a look at the volume trends, they're strong. They're bullish.

You see the arrow is pointing to the big volume bar post-earnings. And it's not giving up any ground. That's one thing you have to interpret from this chart is that the stock is not giving up any ground after having risen sharply like that. So it tells me one thing-- tells me that big buyers are still coming after this name and still coming in and buying Airbnb.

So money flow is good. Relative strength got a little bit heated earlier this week. It's pulled back a little bit. And I'm ready for the next move. I think the stock's going to make a nice move for us over the next 18 to 24 months.

CHRIS VERSACE: Excellent, excellent. All right, Bob, we're going to stick with you. We've gotten some questions about Starbucks. Let's take a quick look at the technicals.

BOB LANG: Yeah, so Starbucks had that really sharp move down post-earnings here-- I'm putting the chart up now as we speak-- had a really sharp move down post-earnings and really bounced hard. But right up into the upper Bollinger Bands at about $117 to $119 level.

It's pulled back a little bit. It's flirting with the 200-day moving average as we speak. I think that a little bit of sideways movement, which it's in the zone where it was at right before earnings toward from mid-September until about mid-October. So for about a month, they were in that same zone which is about $110 to $114.

If we can just stay right here for now and start building some confidence for the bulls here, I think the stock's got a chance to make a run back up towards the old highs. The selling that's ensued for the past 4 or 5 days is not really intense. The volume levels have not been very, very strong at all. So I think this is just some of the weak hands pulling money off the table. I think we should get a good sharp snapback in Starbucks shares very soon.

CHRIS VERSACE: So on the fundamental basis, I can tell you that I have visited a number of Starbucks since we initiated the position. And I'm happy to report that the lines are getting longer. The drive-thru lines are unbelievable. So long, in fact, Bob, that I've actually thrown up my hands in frustration and gone into the store to get a drink. That tells me there is a lot of demand there.

In terms of data points to watch, next week, we get the October retail sales. And we'll be digging into the food and beverage service line item which should be very, very good for Starbucks.

All right, and finally, it's bullpen Friday. And we do have a member question. Rick wants to know if we would consider adding Goldman Sachs to the bullpen. Bob, Goldman Sachs, it's a great franchise name. What do you think?

BOB LANG: Absolutely. And maybe one of the reasons why we don't have Goldman in the portfolio right now is because we have one of their competitors, which is Morgan Stanley, which is a similar-looking chart. It's actually a little bit better looking than Goldman on an apples to apples comparison.

But I always like Goldman Sachs. They're the big player in investment banking. And they have a lot of large clients. The stock has performed extremely well for the past 12 months. I would say, absolutely, I like Goldman Sachs, especially with interest rates where they are. They can still make a lot of money.

Again, they have a lot of clients who are equity portfolio holders. And they're going to make money that way. They do a lot of deals. So there are lots of different areas for them to do well. I would say yes, I agree with Rick and say that Goldman is, certainly, a good candidate.

CHRIS VERSACE: Yeah, I think it is too. I do think, though, the point you made earlier, Bob, about comparing it with Morgan Stanley is a valid one. When we look at the lead tables for IPOs, secondaries, and M&A, they are virtually neck and neck year to date in 2021.

Morgan Stanley, in particular, was one of the underwriters for the big Rivian IPO that is just simply zooming adding value to both our Amazon and Ford Motor shares. So all right, well, we'll leave it there. Thank you all for joining us today on Friday. Enjoy your weekend. Bob, myself, and Katherine we'll be back on Monday.

At the time of publication, AAP was long DIS, ABNB and SBUX.