Netflix (NASDAQ 🙂 shares collapsed on Friday, after Disney announced the details of its new streaming service, Disney +, with concerns about increasing the competitive risk. The original streaming giant reports the profit today, after the market has closed. Will investors reassure, or drive more away from them? The graph below suggests that the latter is more likely.
Analysts expect a $ 0.57 earnings per share from $ 4.5 billion, an increase over $ 0.64 earnings per share and $ 3.7 billion for the same quarter last year. Although the company has missed EPS forecasts only three times in the last four years, it has made ten times too few earnings forecasts in the same period. However, some of the most viewed statistics are the growth of subscribers. Netflix added 30 million net new subscribers last year, and analysts expect recent additions to remain around that number.
But can the company maintain that pace with Walt Disney (NYSE 🙂 at Apple (NASDAQ 🙂 when launching subscription services this year? Netflix fell by 4.49% on Friday, at a very heavy volume. Yesterday it again suffered a drop of 0.65%. According to some analysts, this can be a shock reaction: Netflix does not expect the newcomers to offer significant competition for the tight streaming market.
Ironically, the success of the company can also be the catalyst for a failure: market saturation. The shares will rise by 36% this year, more than double the profit of 17%. The technicals, however, signal a grim warning sign for the stock.
NFLX Daily Chart
Since February, the prize has been developing a Head & Shoulders summit. Yesterday's trading pushed it below the neckline, but managed to close just above the line, forming a hammer after it approached 200 DMA low during the day – after the price dropped below 50 DMA – which forms its own organic neckline
Note, the price climbed higher than the large MA, along with the short-up trend since the beginning of the year. The same uptrend line, however, turned into a resistance after a shooting star that was developed on February 5 to reinforce an earlier shooting star that developed on January 16.
Both the MACD and the RSI agree in their bearish attitude, which is rare – the MA & # 39; s of the MACD make it a lagging indicator, while the moment meter of the RSI makes it a leading indicator – since the momentum that the price is expected to lead is the MA of the MACD.
The sell signal from the MACD is exacerbated by both the short MA finding resistance by the long MA, as well as by both below the zero line.
The RSI provides a triple sales signal: (1) descending channel, (2) gives a negative divergence with the upwardly inclined H & S and (3) the momentum indicator fell below the lower limit of the descending channel.
However, the hammer, above 200 DMA, with the closing above the neckline, suggests that not all demand has been absorbed, and a drop below 200 DMA would significantly increase the bearish integrity of the pattern, thereby increasing the potential for bear fall.
Trade Strategies
Conservative traders must wait for a slot below 100 DMA, currently at $ 326.27, with an upward return movement confirming the resistance, with at least one long red candle engulfing a green or small candle of both colors.
Moderate traders would wait at least under 200 DMA for $ 348.87, with a relapse for better imports, not necessarily for pattern proof.
Aggressive traders can go short if the price returns to the 50 DMA, at $ 359.21.
Trade sample
Listing: $ 359
Stop-Loss: $ 360
Risk: $ 1
Target: $ 350, above neckline support
Reward: $ 9
Risk-Reward Ratio: 1: 9
