Netflix (NASDAQ 🙂 shares & # 39; recent wild swings may resemble the flickering of a candle before it goes out.
The stock price fell more than 4% yesterday, after plunging nearly 6.2% on 6 October. The streaming giant is plagued by the prospects of increasing competition in the streaming industry, such as Disney (NYSE 🙂 and Apple (NASDAQ :).
Yesterday's drop came on the heels of news that Verizon (NYSE 🙂 is working with Disney to offer a package with Disney Plus for a year free for unlimited wireless customers – whose communications giant has 50 million – and an increasing number of eligible customers with unlimited subscriptions, as well as the new Fios broadband and 5G wireless home customers for home use
Bulls claim that Netflix has successfully fought against competition. The company has a dramatic head start in streaming content and even if and when Disney catches up, there are plenty of things to go around between the two.
Bears, on the other hand, regard Netflix as a poor investment decision because the technicians suggest that Wall Street has fallen asleep behind the wheel, just as the road is getting busier due to competition.
These two perspectives are reflected in the graph.
Netflix has been consolidating over the long term since June 2018, posting lower highs and simultaneously recording higher lows – converging within a symmetrical triangle. By definition, this pattern means that both supply and demand are increasing, as investors are constantly increasing their bets. But who will win? Which side of the balance between supply and demand will overwhelm the other side and see prices pushed in its own preferred direction?
The share price closed September below its upward line since July 2016. In the first week of October, the share closed again in the pattern. In the second week it penetrated a third deep, but found resistance through the 50 and 100 WMA & # 39; s and closed down below. The stock now falls below the upward line for the second week. That could be a prelude to establishing a downward trend, when a new low would form a new downward series of peaks and troughs.
In the previous sale – the second decline within the triangle, when the price fell below the upward line for two weeks – the price first came within 10% of the 200 DMA since it conquered the most important MA in January 2013. See , it was in line with the bottom of December, the first low in the triangle and the first potential low of a falling trend. This makes this price level a technical pressure point where market mechanics and environment could turn.
Trading Strategies
Conservative traders would wait for two independent peaks and troughs, except for the last peak and trough in the previous upward trend.
Moderate traders can be satisfied with a trough lower than the bottom of December, for two falling peaks and troughs, including the previous peak and trough, that were part of the upward trend.
Aggressive traders would go short on a return to the broken falling line or a closure below the symmetrical triangle.
Trade sample – arrangement of short positions
Admission: $ 280
Stop loss: $ 300
Risk: $ 20
Target: $ 220
Reward: $ 60
Risk: reward ratio: 1: 3
Note: A trade sample is only a sample. It does not assume that it is a winning transaction. Trade success requires multiple transactions that try to make a profit, because some winning transactions cover the losing transactions.
