Netflix Inc. (NFLX) is our Real Money "Stock of the Day" so let's check out the charts and indicators. Prices are lower in early Friday trading so let's see if this is a reversal or a buying opportunity.
In the daily bar chart of NFLX, below, we can see that prices declined from a small double-top pattern back in June/July. Prices did not bottom out until late December. The 50-day and 200-day moving averages were bearish until earlier this month when NFLX started a sharp rally.
Bearish analysts may call the rally from late December "short covering" but that may not be true. There may well be short-covering going on but new longs may be entering as we see the On-Balance-Volume (OBV) rising. The slope of the 50-day average line has turned up and the 200-day line looks like it has started up again.
The trend-following Moving Average Convergence Divergence (MACD) oscillator gave us a number of cover shorts signals in November and December and finally crossed the zero line this month for an outright go long signal.
In the weekly bar chart of NFLX, below, we can see the stock's impressive rise the past three years. NFLX peaked in early 2018 and corrected lower to December but notice that it stopped short of key support in the $200 area. I consider it a sign of strength when a stock stops short of support as it suggests that buyers are being more aggressive. Prices through last Friday are above the flat 40-week moving average line.
The weekly OBV line has turned up and the MACD oscillator on this longer time frame has crossed to the upside for a cover shorts signal.
In this Point and Figure chart of NFLX, below, we can see a very bullish long-term price target of $561. NFLX is in a down column of "O's" but the chart does not show distribution or selling before today suggesting that this dip Friday is not going to be a downside reversal.
Bottom-line strategy: NFLX could dip to retest the 200-day moving average line but I would anticipate that a dip into the $340-$320 would be viewed as a buying opportunity by investors with a longer-term time frame.