Entertainment services firm Netflix (NFLX) is trading lower Thursday. Is this a "normal" pullback or the start of a larger correction? Reports Thursday point to comments by the CFO that "ads tier are not seen driving revenue in the short-term'.
Let's check out the charts and indicators.
In this daily bar chart of NFLX, below, I can see that prices are pulling back to retest the August low. NFLX is trading below the 50-day moving average line but above the rising 200-day moving average line. The On-Balance-Volume (OBV) line turned sideways in the middle of July. The Moving Average Convergence Divergence (MACD) oscillator is poised to move below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of NFLX, below, I can see a number of upper shadows around and above $450. Trading volume has been shrinking for several months now. The weekly OBV line has turned sideways to slightly lower the past few months. The MACD oscillator started a correction in July.
In this daily Point and Figure chart of NFLX, below, I can see a downside price target in the $353 area.
In this weekly Point and Figure chart of NFLX, below, I can see an upside price target in the $555 area.
Bottom line strategy: Traders should take a cautious approach to NFLX. A weak close below $400 on increased volume will not be a positive sign for the stock. Avoid the long side of NFLX.
