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Technical analysis of NFLX

December 09, 2020
BY Michael Stark

In a similar way to various other large cap cyclical shares, NFLX (the representative CFD based on Netflix Inc’s stock) has moved in a fairly tight range since the start of last month. Netflix’s last two earnings reports have been somewhat disappointing, with EPS for Q3 as released on 20 October at $1.74 against the consensus of $2.13. Estimated PE for the whole of 2020 is now slightly over 80.

High resistance on this chart is the latest high around $571, only slightly below the all-time high of $574.88. Low support is less clear but might occur around $470. Meanwhile the psychological area of $500 is likely to remain in focus in the runup to Christmas.

Technical indicators on NFLX H4

Moving averages are unclear. All three have bunched very close together just below the price. However, they continue to give a strong buy signal on the daily chart, with all three of the 50, 100 and 200 SMAs successively above slower lines and below the price. $500 is likely to be a critical pivot point over the next few weeks because of its confluence with the value area between the 50 and 100 SMAs on D1.

There is no clear overbought signal at the time of writing from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5); however, price is close to the zones of buying saturation for both indicators. Volume has been significantly lower since the start of November.

Price action and Fibonacci

There was a liquidity-driven upward movement after Monday’s gap up, but so far there’s been no follow through to push above 5 November’s high of $518.37. Given the psychological importance of $500, it seems reasonable to expect consolidation before another strong upward wave.

The resistance slightly below $520 looks stronger as a result of the 50% daily Fibonacci retracement area in this zone. While other retracements don’t yet show clear signs of supporting or resisting movements, the 61.8% area of the weekly Fibonacci fan might be a medium-term target for buyers.

Technical analysis of NFLX: summary

Overall the technical picture for NFLX is quite positive; more gains seem to be likely over the next few months. Before these, though, consolidation is favourable given that the important psychological area of $500 has only recently been reclaimed. The main scheduled event to be monitored over the next few months is Q4’s earnings report on 19 January. The consensus EPS for Q4 is $1.37.

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