Netflix (NFLX) saw its shares slump on Thursday as investors fretted over reports of refunds to advertisers due to missed viewer estimates. Let's check out the charts of the streaming giant again.
In this daily bar chart of NFLX, below, I can see that prices did some bottoming in May-July and rallied into December. Prices eventually moved above the rising 50-day moving average line and above the declining 200-day line. The trading volume increased to the middle of October and then declined.
The math-driven On-Balance-Volume (OBV) line made a slow rise from early May, and if we look closely we can see that the line has stalled from late October even though prices continued to rise. This is a bearish divergence. Another bearish divergence can be seen on the 12-day price momentum study, which shows a lower high from October to December despite prices making a higher high.
In this weekly Japanese candlestick chart of NFLX, below, I can see a top reversal pattern in the end of November and the beginning of December. Even if you don't recognize the reversal you should be able to see upper shadows on the two most recent candles. Prices are above the bottoming 40-week moving average line. The weekly OBV line shows weakness from late October to now. The MACD oscillator has improved from June but still needs to move cleanly above the zero line for a buy signal.
In this daily Point and Figure chart of NFLX, below, we can see the recent decline and also that the software is now projecting a potential downside price target in the $243 area.
Bottom line strategy
: In my Oct. 17 review of NFLX
I looked back at my Sept. 28 Netflix review where I had written: "Maybe the fundamentals for NFLX are improving. Maybe not yet. I will stay on the sidelines until I see evidence that a sustained rally is possible." Unfortunately, the charts are still mixed."
Reviewing the charts above, I now look for further downside price weakness as sellers of NFLX are becoming more aggressive. Avoid the long side for now.
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