When to Buy the Dip in Netflix After Earnings Pullback

Netflix is trading lower after mixed earnings. Let's look at the charts to see what clues lie in the technicals.
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Netflix  (NFLX) - Get Report isn’t giving bulls the post-earnings reaction they were hoping for, with shares down about 7% on Wednesday.

The decline came after the company issued its third-quarter report after the close on Tuesday. While Snap  (SNAP) - Get Report was soaring on earnings, Netflix is not, leaving tech growth investors wondering what to do.

Earnings of $1.74 a share missed estimates by 39 cents, while revenue climbed 22.7% to $6.44 billion and beat expectations by $60 million.

Worse than the mixed headline numbers was the net addition to subscribers, which climbed by just 2.2 million to 195.15 million. That missed estimates of 2.5 million new subscribers.

On the plus side, free cash flow was strong. But Netflix isn’t as much a cash flow story as it is a growth story. Will investors look past the bumpy quarter and buy the dip? Let’s look at the charts.

Trading Netflix

Daily chart of Netflix stock.

Daily chart of Netflix stock.

Netflix opened below the 50-day moving average, was rejected by this measure on its rebound, then dipped down to the 100-day moving average near $490.

The 100-day moving average was rough support in September, when the stock market - and largely speaking, tech stocks - were suffering amid a selloff.

Will it be enough to buoy the stock again? For aggressive bulls, the dip is at least enough to warrant a dip-buy in the name. Those buyers will likely consider adding to their position if Netflix stock can reclaim the 50-day moving average and the post-earnings high (currently at $506.85).

In that case, a gap-fill up toward $525 is on the table.

The issue for conservative bulls is a reasonable one: Netflix stock could break the 100-day moving average and fall another $25 and still be in decent shape.

That’s because Netflix has been range-bound for months now. $560 has been resistance on the upside, while support has come into play between $565 and $570.

Some bulls may feel better about buying near range support, with a close below last month’s low at $458.60 being the risk spot to watch. Below that and the 161.8% extension, likely puts the 200-day moving average on the table.

Should Netflix fill the gap on the upside, it puts range resistance back in play. For now, Netflix is a range trade until proven otherwise.