Netflix Earnings Preview - After Strong Showing, Here's the Must-Hold Support

Netflix stock has been on fire the past few months. What does that mean for NFLX stock ahead of earnings? The charts show the must-hold support level.
Author:
Publish date:

Netflix (NFLX) - Get Report shares are little changed on Friday as investors await the streaming giant's quarterly report, due after the market closes on Tuesday.

The stock has gained as bulls have built momentum; the shares earlier struggled as streaming competition heated up. That rivalry includes Apple (AAPL) - Get Report and Disney (DIS) - Get Report  entering the fray, and now includes Comcast’s (CMCSA) - Get Report Peacock service, which was detailed on Thursday evening.

Here are five key things to watch when the company releases its fourth-quarter results.

And let's look at the charts.

Apple, Comcast and Disney are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL, CMCSA or DIS? Learn more now.

Trading Netflix Stock

Daily chart of Netflix stock. 

Daily chart of Netflix stock. 

Above is an 18-month daily chart of Netflix stock. Investors have enjoyed big gains, both recently and from the third-quarter lows. Netflix shares are up 17% from the December lows and 35% from the September lows.

But Netflix stock is not an easy tell ahead of what is typically a volatile event.

While the stock has been hot lately, it’s nowhere near records and is certainly not as overbought as many of its peers, particularly in the FAANG group. In fact, Netflix has underperformed the entire group over the past year.

Here’s what investors need to see when Netflix reports earnings. 

In first-half 2019, Netflix stock was range-bound between $340 and $385. When support broke, it caused the shares to flush lower.

Netflix stock is now knocking on the $340 door, as it continues to ride short-term uptrend support (purple line) and the 20-day moving average higher. A break over $340 could propel the shares back into their prior trading range.

In the event of a pullback, investors have to be aware of the downside levels. In this case, the first support zone comes at $330, which has the aforementioned uptrend support mark and 20-day moving average.

Below that and the $315 to $320 area becomes key. That’s where Netflix stock will run into the declining 200-day moving average, which has been support, as well as the rising 50-day moving average. It’s also where the 50% retracement for the 52-week range sits, as well as longer-term uptrend support (blue line).

If this area fails as support, it puts $300 or lower on the table.

So what’s the bottom line? See if Netflix stock can reclaim its prior range on a rally and see if key support holds on a pullback. Then, investors can make their move.