Technical Analysis – Netflix stock collapses out of a 3-month trading range

Anthony Charalambous, XM Investment Research Desk

Netflix stock plummeted out of a three-month sideways market breaching the lower boundary of 335.88, where the 200-day SMA also happened to lie. The stocks’ one-and-a-half-month plunge which started July 11, had the price retrace to around 287.09, slightly below 290.15, which is the 61.8% Fibonacci retracement level of the up leg from 230.78 to 386.00.

The MACD suggests an increase in positive directional momentum as it has moved above its red trigger line in the negative zone. The RSI although gaining in the bearish territory has started to turn slightly flat, something which implies that another move to the downside cannot be ruled out. Furthermore, a bearish cross of the 200-day SMA by the 40-day SMA has occurred.

To the downside, if the bears manage to breach the 61.8% Fibo of 290.15, the December 3 level of 280.50 could provide some support, before a shove to test the 76.4% Fibo of 267.50. If selling persists, the eleven-month low of 230.78 could draw attention, once the 255.00 handle gives way.

Moving north, initial resistance could come from the 21-day SMA around 303.60, before the 50.0% Fibo of 308.40. If the ascent continues the 40-day SMA and 38.2% Fibo of 326.60 could apply some downside pressure. The bulls could then try for the resistance obstacle of 335.80, where the 200-day SMA also hovers, before consideration of the 23.6% Fibo existing at 349.30.

Summarizing the short-term picture still seems bearish. A close above 335.80 swing high would bring back the neutral bias.