Netflix Stock Chart Analysis

Netflix (Nasdaq: NFLX) is scheduled to report earnings after the closing bell tonight and the consensus estimate is for the company to earn $0.83 per share on revenue of $1.27 billion. These estimates are up from the $0.79 the company earned last quarter when the company surprised analysts. Looking at the daily Netflix stock chart below, you see the last earnings report as the stock gapped from the $330 area up to the $390 area before running all the way up to the $460 area in March.

Daily Netflix Stock Chart


The blue circle shows how the stock had been in a slump heading into the earnings report, much like it is today. The stock was oversold back in January and had been in oversold territory until gaining 4.3% on Thursday. We also see how the low on Tuesday was just slightly below the low in January, creating a support level for the stock.
Looking at the weekly chart, we see more layers of support coming into play. Last week’s low was $312 which is close to the high from July 2011. We also see that the low from last week dipped just below the 52-week moving average which is at $316.06. That gives us three different layers of support—the low from January, the former high from 2011 and the moving average.

Weekly Netflix Stock Chart


The other thing worth noting is that the weekly indicators show that the stock is the most oversold it has been since September 2012 (as noted by the blue vertical line). I have also made notations on the RSI chart and the slow stochastic chart.
Turning our attention to the sentiment indicators, the analysts are not big fans of Netflix stock. There are a total of 38 analysts following the stock with 10 rating it a “buy”, 24 rating it a “hold” and four rating it as a “sell”. It is hard to believe that the analysts are so down on a stock that jumped from $55 to $458 in 17 months.
The current put/call ratio for NFLX is 0.78 and that is the lowest reading in the past year. One interesting thing about NFLX is that the put/call ratio doesn’t work the way most put/call ratios do. Usually when we see a low ratio, it is a bearish sign for the stock as it means optimism is running high. With NFLX, the ratio seems to work in reverse.
The stock has bottomed when the put/call ratio has been at its lows. This could be a result of more option selling than option buying. What I mean by that is that institutions sell puts or calls and the party on the other side of the trade is a market maker and market makers will offset their option position with another position so as to remain neutral on the stock. This would cause a misleading put/call ratio in that a put seller is neutral to bullish on the stock rather than bearish. A call buyer is bullish whereas a call seller is neutral to bearish on the stock.
The bottom line on Netflix is that the stock has three layers of support below the current level and the sentiment indicators are indicating that the stock is due for another rally. Personally I don’t like playing a stock ahead of the earnings report, but if I were going to bet on Netflix it would be a bullish bet.

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