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These Are Netflix's Must-Know Levels Ahead of Earnings

Netflix is set to report earnings on Tuesday. Here are the must-know levels to trade against once the stock is on the move.

For months now, I have been harping on about the consolidation we’ve been seeing in Netflix  (NFLX) - Get Netflix, Inc. Report and other FAANG holdings.

But we’ve started to see those consolidation phases resolve to the upside.

Specifically, Microsoft  (MSFT) - Get Microsoft Corporation Report has made a nice move to new highs. Apple  (AAPL) - Get Apple Inc. Report has been trading better, as has Amazon  (AMZN) - Get, Inc. Report.

Nvidia  (NVDA) - Get NVIDIA Corporation Report - while not in the FAANG group - also made a nice move to new all-time highs.

So the question now is whether Netflix can join the party. The stock has given us mixed signals, trying to rotate higher but clearly hesitating ahead of earnings scheduled for Tuesday after the close of trading.

Streaming platforms continue to boast momentum, with Netflix recently announcing it had surpassed 200 million paid subscribers.

More recently however, reports have circulated that the company may crack down on password sharing, which bulls argue should boost subscribers in the long haul.

Microsoft, Apple, Amazon and Nvidia are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells MSFT, AAPL, AMZN or NVDA? Learn more now.

Trading Netflix

Daily chart of Netflix stock.

Daily chart of Netflix stock.

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A few weeks ago, Netflix stock gapped above the March high at $543.12. While it’s failed to gain much momentum over this measure, it continues to hold above this mark.

Further, it’s holding up over the 10-day moving average. While it’s possible Netflix has a muted response to earnings, it’s also possible it makes a much larger move.

If the move is higher, look for the stock to take out this month’s high at $559.75. Above $560 will put range resistance in play, near $575.

Note that this level has been in play since July when the stock topped out. That’s unlike most of FAANG and tech in general, which topped in late August and early September.

From there, the following upside targets are actually pretty measured. Above $575 puts the all-time high in play near $593. Above $600 opens the door to the 161.8% extension near $650.

What if the reaction is lower?

On a break of $543, look for support near $535. That’s where the 21-day, 50-day and 10-week moving averages come into play.

Given that that’s only a few percent below current prices though, it may not hold up during a bearish reaction. 

In that case, keep the 200-day moving average on your radar, followed by the $500 to $505 area. The latter zone should act as decent support should Netflix get there.