The stock has been trending lower on the daily time frame since Sept. 5, declining about 20% since that date. On Wednesday, Netflix gapped down to start the session but was attempting to close flat.
When the streaming giant printed its second-quarter results on July 19, the stock dropped about 8.41% the following day before trading mostly sideways until Sept. 5.
For the second quarter, Netflix reported earnings per share of $3.29, beating the Street estimate of $2.85. The company reported revenues of $8.19 billion, which missed the $8.29-billion consensus estimate.
For the third quarter, analysts expect Netflix to report earnings per share of $3.46 on revenues of $8.532 billion. The company guided for earnings per share of $3.52 on revenues of $8.52 billion.
From a technical analysis perspective, Netflix’s stock looks neutral heading into the event, trading in oversold territory and looking to print an inverted hammer candlestick but under the 200-day simple moving average.
It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.
The Netflix Chart: Netflix was breaking down from a bear flag pattern Wednesday, confirming its downtrend remains intact. The most recent lower high was formed on Monday at $363.08 and the most recent confirmed lower low was printed at the $352.05 mark on Friday.
- The measured move of the bear flag pattern is about 9.43%, which suggests Netflix could plunge toward $326. A rise, at least to form another lower high is likely to take place over the next few days, however, because Netflix’s relative strength index is measuring in at about 29%.
- On Oct. 11, Netflix dropped under the 200-day simple moving average, which suggests the stock is trading in a bear cycle. If Netflix receives a positive reaction to its earnings print and regains that area, the recent price action will serve as a bear trap.
- If the stock drops further on Thursday and continues in its downtrend, the 50-day SMA will eventually cross below the 200-day, causing a death cross to form.
- Netflix has resistance above at $349.80 and at $368.90 and support below at $333.22 and at $294.75.
Produced in association with Benzinga
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