Home REITs If Netflix Shares Clear This Level, They Could Rally Another 20%

If Netflix Shares Clear This Level, They Could Rally Another 20%

by WOOWinvest
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If Netflix Shares Clear This Level, They Could Rally Another 20%


Netflix (NFLX) – Get Netflix Inc. Report It is breaking the streak of its post-earnings plunge, which is a huge development for the bulls.

If simply not falling is a huge win for the bulls, it shows how dire things have become.

Netflix kicked off the FAANG stock gains by reporting quarterly results after the bell on Tuesday. Earnings beat estimates and revenue rose 8.6% year over year, but missed consensus estimates.

Perhaps the most important metric was better than feared: Netflix lost 970,000 subscribers, not the 2 million the company had guided for last quarter.

Those measures, along with guidance that missed expectations and disappointing margins after analyzing the data, aren’t all that encouraging.

But after falling 77% from an all-time high set eight months ago, the stock is expected to eventually rebound on such news.

At some point, we also have to realize that Netflix has become a value stock rather than a growth stock. It still trades at around 18 times earnings.

Trading Netflix Stock After Earnings

A daily chart of Netflix stock.

Now that the stock did rise on better-than-expected news, investors wondered if this might be the moment for Netflix to rise.

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Netflix stock rose to its 10-week moving average on Monday and Tuesday, the first test since April. While the metric was resistance earlier in the week, Netflix was able to break the metric on Wednesday following its earnings report.

Just over 10 weeks was the June high at $207.38. A close above this level is important in my opinion. It keeps the stock on a monthly upward rotation and above the 10-week moving average.

That’s important because we haven’t really seen a strong earnings response so far. In that sense, Netflix stock remains vulnerable.

If the stock breaks below the June high, bulls need to keep the stock above $200. A break below $200 will affect the previous downtrend resistance (blue line), followed by the 21-day and 50-day moving averages.

Above $207.50, perhaps Netflix could gain more momentum. Above $216 — and a potential broader market rally — could open the door to the $245-$250 area.

That area is about 20% above the June high and would take Netflix to the gap high and the 50% retracement level from the 52-week low to the gap filling level near $333.

Bulls need to remember that the long-term trend remains bearish, while the short-term trend is improving.

Bears need to keep in mind that Netflix stock was trading at $700 in November, compared to $160 for the past three months.

As a result, shares could double (a lot of pain for short sellers) while still in a bearish technical setup.

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