Netflix stock has rallied almost 50% off the low, but it’s still down significantly. Here’s how to trade it ahead of and after the earnings report.
Netflix (NFLX) – Get Netflix Inc. Report stock has been trading well lately, up almost 50% from the 2022 low.
It still hasn’t been an easy stretch.
The streaming giant’s shares suffered a peak-to-trough decline of 77% from the November high to the 2022 low, a sharp decline in roughly six months. From that perspective, Netflix was the worst performing stock in the FAANG group.
As is usually the case, the company will report earnings before the rest of the FAANG cohort. It is set to report quarterly results after the close on Tuesday (here’s a preview on the quarter).
Generally, investors like to see the reaction to Netflix to get a gauge on how other FAANG and tech holdings might react in the weeks to follow.
Technically, the stock is in a mixed situation ahead of the earnings. It’s still down significantly but it’s rallied hard from the lows too. Let’s take another look.
Trading Netflix Stock on Earnings
Weekly chart of Netflix stock.
Chart courtesy of TrendSpider.com
When the company reported earnings in April, Netflix stock plunged through the covid low near $290 and even below major support in the $230 to $250 area.
Ultimately, it found its footing around $175 and has since traded back into the $230 to $250 area, where it has been consolidating since mid-July. Note some of the relative strength it’s shown vs. the overall market over the past few months.
From here it’s a fairly straightforward approach. If the earnings reaction is bullish, look for Netflix to gap over the $250 level. That opens the door toward the $290 to $300 area.
In that zone, there’s the $290.25 covid low and the declining 10-month moving average. If Netflix gets there this week, it would represent a rally of 22% to 26% from current levels.
On the downside, keep an eye on the $200 to $210 zone. A break of this area could open the door back down to the $175-ish area, which was notable support. If Netflix trades down to this zone, the bulls will desperately want to see this area buoy the stock.
Below that could put the 52-week low in play near $163, along with the 200-week moving average.
In a nutshell, look to see if Netflix can clear and hold $250 on a bullish reaction. On a bearish reaction, see if it can hold the $200 to $210 zone.
