Netflix, Inc. (NASDAQ:NFLX) Could Reward Timely Short Sales
Netflix, Inc. (NFLX) ceded leadership of the FAANG complex in July, topping out and gapping down following a poorly received second quarter earnings report. Selling pressure eased in August, but the subsequent bounce has failed to fill the gap while weekly relative strength cycles have hit overbought levels. This potent combination raises the odds for a secondary downturn that rewards opportune short sales.
The company sharply lowered third quarter new subscriber guidance during the July confessional while talking down Wall Street earnings and revenue estimates. A wave of downgrades followed the news, but the usual suspects have come to the rescue in the past two months, talking up 2019 performance ahead of the Oct. 16 third quarter report. Even so, potential investors are acting cautiously, generating few technical signs of committed buying interest.
The stock broke out above five-year resistance at a split-adjusted $5.50 in 2009, entering a powerful trend advance that topped out in the mid-$40s in July 2011. It got crushed in the next year, dropping into the single digits before finding support within two points of the multiyear breakout. A bounce completed a round trip into the prior high in September 2013, generating a quick rally into the $60s before easing into a sideways pattern on top of new support.
It cleared range resistance in 2015 and entered a stair-step uptrend that caught a momentum wave at the start of 2017. The stock price more than tripled into June 2018, posting an all-time high at $423.21 and pulling back in a minor retracement. A July breakout attempt then failed, completing a double top breakdown during the post-earnings sell gap.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 359.90.
The projected upper bound is: 388.25.
The projected lower bound is: 339.08.
The projected closing price is: 363.67.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 23.1631. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.54. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 32 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -40. This is not a topping or bottoming area. The last signal was a sell 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
NETFLIX INC closed down -13.400 at 363.650. Volume was 16% below average (neutral) and Bollinger Bands were 37% narrower than normal.
Open High Low Close Volume___
375.880 375.920 360.400 363.650 9,074,350
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 373.22 354.88 321.50
Volatility: 35 45 48
Volume: 8,818,200 9,283,075 10,502,211
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NETFLIX INC is currently 13.1% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of NFLX.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on NFLX.O and have had this outlook for the last 26 periods.
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