A smaller sell-side firm upgraded Netflix (NFLX) to "overweight" from "neutral" (buy from hold) Wednesday. In our July 14 review of NFLX we wrote that "I am not sure that one deal can cure what ails NFLX, but it can only help in my opinion. Maybe the worst is behind us."
Let's check on the price action again as we look forward to the next season of Stranger Things.
In the daily bar chart of NFLX, below, we can see that the shares have traded sideways the past two months. Prices have managed to stay above the rising 50-day moving average line. The slope of the 200-day moving average line is bearish and intersects up around $300.
The On-Balance-Volume (OBV) line made a low in early May and shows improvement. The Moving Average Convergence Divergence (MACD) oscillator is holding around or on the zero line and could turn up or down from here.
In the weekly Japanese candlestick chart of NFLX, below, we see a mixed picture. The shares are still in a longer-term downtrend as they trade below the 40-week moving average line.
The weekly OBV line shows an advance into September but a recent potential peak. The MACD oscillator is rising but remains well below the zero line.
In this daily Point and Figure chart of NFLX, below, we can see a potential downside price target in the $197 area. A trade at $252 would refresh the uptrend.
In this second Point and Figure chart of NFLX, below, we used weekly price data. Here a price target of $345 is shown.
Bottom-line strategy: 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.
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