Flood video giant Netflix, Inc. (NFLX) had a volatile ride this week as shares gapped higher on Tuesday after the guests announced that it was raising its monthly subscription price to $13 on its 58 million U.S. subscriber base as costs be produced. The stock – which closed at $332.94 on Monday, gapped with an open of $349.60 on Tuesday and then traded as rich as $358.85 on Wednesday – was set for a positive reaction to earnings after the close on Thursday. The 4:00 p.m. close for Netflix stock on Thursday was $353.19.
We be acquainted with how volatile Netflix can be in reaction to earnings, but most on Wall Street expected that the sky was the limit. The stock reported better-than-expected subscriber cultivation and earnings per share results but missed expectations on revenue and lowered its outlook for the first quarter.
The Netflix bulls forgot that the firm would be spending a king’s ransom for content this year to stay ahead of new streaming competition from Amazon.com, Inc. (AMZN), The Walt Disney Visitors (DIS) and AT&T Inc. (T). It was not a surprise that Netflix will burn through $3 billion in 2019 for content.
Investors who believe in the longer-term white for Netflix had a chance to buy the stock on weakness in after-hours trading on Thursday. Going into earnings, Netflix stock terminate Thursday, Jan. 17, at $353.19, up a staggering 32% so far in 2019. The stock was also 52.7% above its Dec. 26 low of $231.23. The range was still in correction territory at 16.5% below its June 21, 2018, high of $423.20.
The daily chart for Netflix
This habitually chart for Netflix will not show the after-hours trades, but we see that the stock gapped above its 200-day stark moving average at $334.10 and above the horizontal line that represents my monthly pivot at $342.10. In after-hours merchandising following the earnings report, Netflix shares traded as low as $333.38, which gave investors the opportunity to buy the stock at its 200-day unvarnished moving average at $334.10. If you are bullish on Netflix, consider the level between $327.12 to $342.10 as your buy zone. These two flat lines are my semiannual and monthly pivots.
The weekly chart for Netflix
The weekly chart for Netflix discretion remain positive if the stock ends the week above its five-week modified moving average of $304.13, which have all the hallmarks highly likely. The stock is well above its 200-week simple moving average, or “reversion to the mean,” at $177.96. The 12 x 3 x 3 weekly late stochastic reading is projected to rise to 45.28 this week, up from 28.43 on Jan. 11. When the stock was following at its all-time high of $423.20 on June 21, the stochastic reading was above 90.00, indicating that the stock was in an “amplifying parabolic bubble,” which proved to be an accurate technical warning.
The horizontal lines are the Fibonacci retracement levels of the bull market run from $79.95 in February 2016 to the steep of $423.20 set on June 21, 2018. The stock closed Thursday, Jan. 17, above its 23.6% retracement at $342.32 and then exchanged back and forth around this key level in after-hours post-earnings trading. Consider the 38.2% retracement level as primary support at $292.22.
Trading Strategy: Given these charts and analysis, investors should buy the stock if it trades between my semiannual centre at $327.12 and my monthly pivot at $342.10. This range includes the 200-day simple moving average at $334.10 and the 23.6% retracement at $342.32 stock up with my monthly pivot at $342.10. If these key levels hold, the upside in the first quarter is to my quarterly risky floor at $379.92, where positions should be reduced.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any attitudes within the next 72 hours.