In our last review of Netflix (NFLX) on March 9 we wrote that, "The decline in NFLX could be over but that is not a reason to recommend purchase. Maybe a new base pattern can soon begin?" The shares have struggled in the past four weeks and now the fundamental analysts at BMO Capital and Barclays have cut their price targets for the subscription service.
Let's review the charts again.
In the daily bar chart of NFLX, below, we can see that the shares made their zenith in November and turned lower into a March nadir. Prices recovered modestly into April and have drifted back down towards the March low. NFLX is trading below the declining 50-day moving average line as well as the declining 200-day line.
The On-Balance-Volume (OBV) has been weak and is close to making its own new low for the move down, perhaps before prices do. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside just below the zero line for a new outright sell signal.
In the weekly Japanese candlestick chart of NFLX, below, we can see a couple upper shadows around $390 as traders rejected that area. With no lower shadows yet we do not have a clue whether prices are becoming attractive to buyers.
The weekly OBV line is pointed down and tells us that traders are more aggressive as sellers than as buyers. The MACD oscillator is bearish but has narrowed a little in recent weeks.
In this daily Point and Figure chart of NFLX, below, we can see that a price target target in the $287 area is being projected.
In this weekly Point and Figure chart of NFLX, below, we can see that prices have reached and exceeded a price target in the $487 area. A trade at $327.97 is likely to refresh the downtrend.
Bottom-line strategy: We are in the process of signing up for internet and TV service at our new home. Even with bundles and packages the numbers are steep. I wonder out loud if consumers are getting hurt in the supermarket and at the gas pump that they will be taking money out of their entertainment budget. Might be an interesting survey. In the meantime, I would continue to avoid the long side of NFLX.
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