Home > Short-Term Trader > NFLX On The Radar: Gap Fill In The Cards

NFLX On The Radar: Gap Fill In The Cards

November 5, 2010 Leave a comment Go to comments

Netflix (NFLX) reported better than expected earnings on October 20th,  sending the stock up to new all-time highs. However, since breaching the old high made in September it has fallen back below, and underperformed the Nasdaq considerably over the past week. Equity markets, as a whole, look pretty rich; any correction in the near-term is likely to tip NFLX over the edge.

In addition, and more importantly from a technical standpoint, NFLX is forming a head-and-shoulders pattern with the neckline residing just at the bottom end of the range created post earnings announcement. A firm break below 165 will put NFLX under the neckline and 20 day, squarely in the gap. Some trend support might come in around the 160 level. The projected target for this quick-hitter is for a fill of the pre-earnings gap –153. The 50-day ema/sma is ~154 and rising, so this will be another area of support to watch as well.

There is the alternate possibility of a bullish triangle. If this comes to pass as the dominating pattern, then the recent relative weakness was just a breather and the rotation effect will be in play. At this time, however, the first scenario looks most likely; but, as always, I will let the price action be the final arbiter.


Categories: Short-Term Trader
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