Investors are rotating back to “reopening” sectors like airlines, financials and energy. This runs against the dominant theme for most of the coronavirus period, which focused on stay-at-home stocks.
Netflix is obviously one of the biggest examples of that “Covid trade.” Not surprisingly, it’s lagged recently as other parts of the market have taken off.
The chart also has some bearish patterns. First and foremost was the large “blowoff top” on July 13. This appeared on most major technology stocks and Nasdaq constituents (except semiconductors). It also produced a bearish outside candle for the Nasdaq-100.
NFLX has remained entirely below this large bearish candle for more than three weeks – a sign of resistance taking hold.
Next, the streaming-video stock followed an uptrend since March that it’s now violating. Its last attempt to hold that line now look like a bearish flag that’s broken to the downside.
Finally, the fundamentals aren’t so hot. NFLX obviously benefited from an initial surge of business as lockdowns spread. (Q1 subs +16mln.) But last quarter executives bluntly admitted “we expect less growth” in the future. (The main reason seems to be that many would-be signups were only shifted forward in time.)
Given the macro backdrop and slowing fundamentals, it may be too early to “buy the dip” in NFLX. The next big level to watch on NFLX is the July 24 low of $467.54. Selling could increase if the stock closes under that.
Netflix is obviously one of the biggest examples of that “Covid trade.” Not surprisingly, it’s lagged recently as other parts of the market have taken off.
The chart also has some bearish patterns. First and foremost was the large “blowoff top” on July 13. This appeared on most major technology stocks and Nasdaq constituents (except semiconductors). It also produced a bearish outside candle for the Nasdaq-100.
NFLX has remained entirely below this large bearish candle for more than three weeks – a sign of resistance taking hold.
Next, the streaming-video stock followed an uptrend since March that it’s now violating. Its last attempt to hold that line now look like a bearish flag that’s broken to the downside.
Finally, the fundamentals aren’t so hot. NFLX obviously benefited from an initial surge of business as lockdowns spread. (Q1 subs +16mln.) But last quarter executives bluntly admitted “we expect less growth” in the future. (The main reason seems to be that many would-be signups were only shifted forward in time.)
Given the macro backdrop and slowing fundamentals, it may be too early to “buy the dip” in NFLX. The next big level to watch on NFLX is the July 24 low of $467.54. Selling could increase if the stock closes under that.
