A Bottom for Netflix Is Not Confirmed Until Its Next Earnings Report

(This is an excerpt from an article I originally published on Seeking Alpha on July 11, 2012. Click here to read the entire piece.)

In the past, I have only had bearish things to say about Netflix (for example, “Netflix Tags the $110 Target But More Downside To Come” from September 30, 2011). However, I feel like I can finally say something positive about the stock, even if my words are laced with caveats.

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The daily chart below shows how the recent breakout is very similar to the one that began 2012. Both feature runs above the 50-day moving average (DMA). The last rally produced a 67% gain in less than six weeks and included a strong response to an earnings report. The boxes in the chart below highlight the breakout points.

Click for a larger view…


A repeat breakout for Netflix
A repeat breakout for Netflix



This repeat breakout is doubly important because it is coming off critical support that could mark a bottom for NFLX. The weekly chart below shows that the recent selling finally ended not only around the last bottom from November, 2011, but also right where NFLX experienced a major breakout in 2010.


NFLX's second breakout from critical support may have finally produced a bottom
NFLX's second breakout from critical support may have finally produced a bottom

Source: FreeStockCharts.com

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Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on July 11, 2012. Click here to read the entire piece.)

Long NFLX shares and puts; long FB

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