Disney (DIS) reports earnings tomorrow, and history suggests that both stock momentum and short interest trends are predictive. The stock typically extends its pre-earnings move, and with shares up recently, this is a bullish sign. Additionally, short interest has dropped by 6%, a historically strong buy signal. The options market expects a 6.4% move, and Disney has beaten earnings estimates six times in a row. With improving sentiment and shorts covering, history suggests DIS could rally post-earnings.

Disney (DIS) reports tomorrow before the close.

Disney has a strong momentum pattern around earnings, with the stock usually continuing the return from the week before. The return after earnings is, on average, higher than that of the week before. The blue slope is higher than most other stocks.

In addition to the stock return being predictive, the short interest is predictive. When short interest decreases, the stock generally rises, suggesting that shorts are usually correct before earnings for Disney. (See the orange dots on the graph.)

Recently, the stock is up slightly, which is bullish given that the return after earnings tends to amplify the return before earnings, on average.

More importantly, short interest is down by 6%, a significant move, which is bullish for Disney based on historical patterns.

When Disney's short interest is down, there have been 2 down earnings, 4 up earnings, and 1 wash.

The recent graphs show how much short interest has fallen.

The options market is expecting a 6.4% move, consistent with how much Disney has been moving recently.

DIS has surprised positively 6 times in a row, but that has not guaranteed a positive return, as positive returns have occurred only about 2/3 of the time.

After receiving negative press coverage last year, Disney's news has been more positive recently.

With Disney’s stock up pre-earnings and short interest down 6%, historical patterns point to a bullish setup. While past earnings beats haven’t always translated into gains, positive momentum and short covering suggest upside potential. Keep an eye on Disney’s report—history favors a rally.

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