If Disney could break this level, new highs would be next, says trader

Disney reports earnings Tuesday and some traders think the stock could surge

Disney's magical rally is on pause as the company heads into its earnings report Tuesday after the bell. The stock soared out of the gates to start the year, rallying 12 percent off its lows at the end of December before running out of gas mid-January.

The options market is implying a more than 2 percent move up or down for the stock, and while options traders seemed to be split on the direction, Dan Nathan of RiskReversal.com says the chart is pointing to a breakout.

"Since its 2015 highs, [Disney] has been in this kind of wedge … a series of higher lows and lower highs, and it broke out last year above that," Nathan said Monday on CNBC's "Fast Money."

"If you take out the December massacre here, and maybe you have a little bit of long-term support at $110," Nathan said, "a beat and raise and you could have this thing on its way back near $122. That was its all-time high in 2015."

Carter Worth of Cornerstone Macro agrees that Disney has high prospects.

"The line from the peak at $122 was from 'Star Wars,'" Worth said Monday on CNBC's "Fast Money," referring to Disney's acquisition of the "Star Wars" franchise. "The stock, ultimately, is headed back there."

Disney was trading just under $112 per share on Tuesday.