After stocks boomed this year, gaining more than 60% and leaving 3% + YTD gains in the dust, Netflix (NASDAQ 🙂 is too late for a correction.
Stocks of the Los Gatos, California-based streaming entertainment provider began to soar long before the coronavirus became a threat to public health. The stay-at-home environment fostered by COVID-19 only served as a catalyst to boost the already thriving business.
As the pandemic appears to be receding in the US and globally and investors expect governments around the world to perhaps ease social restrictions, the gushing giant's stock appears poised for a take-profit correction.
To be clear, we are optimistic about Netflix in the long run, even if the coronavirus threat ends tomorrow. We are confident that the company will almost certainly strengthen its market position, which could mean it will even topple cable-bound TV.
However, we are betting on a sale in the short to medium term. Netflix is ??significantly underperforming its FANG competitors and has been the most under that cohort since May. And recently it had its worst two-day slump since the bottom of March.
On Friday, the stock fell below the rising channel for the first time since the March low. At the same time, it completed a bullish channel – bearish after the previous fall, but especially when that includes downward penetration of its channel, which has framed its incredible 91% rise from the bottom up.
The momentum-based RSI turned heads-up as it fell below its uptrend twice during the same period, even as the flag evolved. The most recent fall below the uptrend line, the third time, coincided with price, and is a hair's breadth from completing its own peak-trough trend.
Beware of the suspected support area since the June 29 hammer. This broke the resistance that held stocks under pressure for two and a half months from April 16 to July 1. At worst, investors looking to recoup their bets by flipping their positions would support the price, along with those that are still high. on their breakout bet and return the stock to its uptrend. At best, it can dispel doom for a while.
Regardless, the USD 450 level is a position to be reckoned with and not a trifle. If the price falls below $ 438, it will have entered a bear market, down 20% from the high of $ 548.73 on July 10.
The moving averages underscore the major technical bottlenecks: the 50 DMA has been realigned with the channel bottom; the 100 DMA joined the supposed USD 450 support, and the 200 DMA is moving towards the USD 400 support. Join the long-term uptrend. The next big support would be the psychological, round dollar amount of $ 400 the February resistance that turned to support from April to June.
Moderate traders can rally to take a profit shortly after the price reaches the USD 450 support.
Aggressive traders can short out the flag completion when it coincides with the rising channel breakout.
Trade Sample – Aggressive Short
Admission: $ 490 at a rally
Stop-Loss: $ 500 – Psychological Round Number
Risk: $ 10
Target: $ 450 – assumed support
Reward: $ 40
Risk: Reward Ratio: 1: 4
