Don't Ignore This Chart!

NFLX Prints Shooting Star On Friday

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Over the past few months, traders have shunned risk and we've seen many high flyers begin to take big hits.  Netflix (NFLX) certainly fits that category and hasn't been immune to the selling.  Recently, NFLX traded at a high of 133.27, but has since fallen to a near-term low of 79.95 reached on February 8th.  It's since rallied 22% in less than three weeks as we've seen an oversold bounce in the U.S. market.  Friday's candle on NFLX may have ended the short-term run, however, as shooting stars off uptrends can mark short-term tops.  The stock's propensity to pivot at 95 adds a great big question mark as well.  Check out the daily chart:


In addition, the rapidly declining 20 week EMA on the weekly chart adds further resistance close to 100 as weekly momentum is horrible, with its MACD recently breaking beneath centerline support and pointing downward.  Check it out:

The weekly negative divergence at NFLX's top suggested the stock could be in for an extended period of selling.  Based on the accelerating selling momentum and an open retest close to 70.00, I believe the path of least resistance is lower.  A high volume push through 100-102 would negate the current bearish signals.

Happy trading!

Tom

 

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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