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Netflix Stock Slumps After Earnings - Charting the Way Forward

Netflix stock is getting crushed after the earnings report. Is it time to buy or get out of the way?

Stocks fell on Wednesday, had a nasty bearish reversal on Thursday -- and then Netflix  (NFLX) - Get Netflix, Inc. Report really dashed the bulls’ hopes, reporting a disappointing quarterly result. 

The market is trying to find its footing (and struggling) on Friday, but Netflix isn’t making it easy.

Netflix beat on earnings expectations, but missed slightly on revenue estimates.

Worse yet, Netflix missed fourth-quarter subscriber expectations, while its outlook for first-quarter subscriber additions badly missed estimates.

Of course, the Los Gatos, Calif., streaming major is not the only culprit, as the Nasdaq remains entrenched in correction territory and as investors try to find a balance between the risk-on, risk-off price action.

Disney  (DIS) - Get Walt Disney Company Report, Roku  (ROKU) - Get Roku, Inc. Class A Report and other streaming plays are getting hit on the news, too, although the overall market action isn’t doing these stocks any favors.

With Netflix well off the highs, is any support nearby?

Trading Netflix Stock

Weekly chart of Netflix stock.

Weekly chart of Netflix stock.

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Netflix stock hit an all-time high on Nov. 17 and at today’s low, the stock was down 45%. It’s the worst-performing Faang stock relative to its all-time high.

The next worst component? Amazon  (AMZN) - Get Amazon.com, Inc. Report, which is down 20% from its high.

With today’s drop, Netflix stock is trading down into a significant area of interest. The question is: Will it be enough to act as support?

Specifically, the stock is trading down into the 200-week and 50-month moving averages, as well as the monthly VWAP measure and the 61.8% retracement of its multiyear range.

It’s also trading back into a big resistance area from 2019 and early 2020, and a support zone after the initial Covid-19 selloff.

Back over $422 puts Netflix back above all these levels. It can start, however, with a rebound back over $400.

That puts Netflix above its monthly VWAP measure. Over $412 puts it above three of the four measures pointed out above, with just the 200-week moving average remaining.

Regaining these measures gives the bulls a great opportunity. But -- it also serves as a notable risk if the stock can’t regain these levels or if they act as resistance.

So far, Netflix is bouncing off the lows and that’s good. Let’s see if it can continue to gain momentum. If not, don’t be stubborn; not in this environment.