Back on January 24 we reviewed the charts of Netflix (NFLX) and wrote that traders should "Continue to avoid the long side of NFLX. The next logical price target is the $300 area."
NFLX has not reached our $300 price target and a sell-side analyst upgraded their opinion for the subscription streaming service to hold from sell on Wednesday. Let's check out the charts to see if a new strategy is needed.
In this daily bar chart of NFLX, below, we can see some subtle clues that the downside may be limited for now. Prices have just made a slight new low but this development has not precipitated further declines. The trading volume has not increased and the On-Balance-Volume (OBV) line has not made a new low to confirm the new price low.
The 12-day price momentum study shows a higher low from January to March even though prices made a lower low. This difference between the price action and the indicator is a bullish divergence and could foreshadow better prices in the days ahead.
In this weekly Japanese candlestick chart of NFLX, below, we see a mixed picture. Prices are still in a downtrend and the most recent candle does not show us a lower shadow. The candle, however, has a relatively small real body and that suggests that buyers and sellers of NFLX are getting closer in balance.
The weekly OBV line is pointed down. The Moving Average Convergence Divergence (MACD) oscillator is bearish but it has begun to narrow which is a step in the right direction.
In this daily Point and Figure chart of NFLX, below, we can see that prices reached a downside price target of $361.
In this weekly Point and Figure chart of NFLX, below, we can see that prices reached and exceeded a downside price target in the $486 area.
Bottom line strategy: The decline in NFLX could be over but that is not a reason to recommend purchase. Maybe a new base pattern can soon begin?
