Trading Strategy For Netflix, Which Reported Mixed Earnings

Netflix (NFLX) reported second-quarter earnings miss after the closing bell on Tuesday, July 20. The consensus estimate was that earnings-per-share would be $3.16 but the company reported $2.97 per share. Revenue came in at $7.34 billion, slightly above consensus.

The key metrics is projected subscribers. For its third quarter Netflix projected 3.5 million new subscribers, which is below consensus of 5.63 million. The company says it will be expanding into offering video games.

The stock traded as low as $513.00 in after-hours trading, then rebounded to as high as $534.18. Stabilization was helped by favorable chart patterns. The 200-day simple moving average was a key level at $517.33. It’s quarterly pivot at $530.58 was a magnet and still is. The weekly chart is positive if the stock ends the week above its five-week modified moving average at $519.38.

The stock opened Wednesday at $526.13 then strength failed at the quarterly pivot at $530.58. By 10:00 A.M., Netflix traded as low as $516.50 just below its 200-day simple moving average at $517.34. Day traders could have sold at $530.58 and bought at $517.34.

The Daily Chart for Netflix

The daily chart for Netflix shows a sideways pattern over the last 52 weeks. The 52-week low is $458.60 set on September 18, 2020. The 52-week high was $593.28 set on Jan. 20, 2021. The rally from low to high was 29.3%.

A close above the 200-day simple moving average at $517.34 targets the quarterly pivot at $530.58 with its monthly risky level at $568.04. The quarterly pivot at $530.58 should remain a magnet at $530.58. The annual value level is near the bottom of the trading range at $476.60.

The Weekly Chart for Netflix

The weekly chart for Netflix stays positive given a weekly close above the five-week modified moving average at $519.38. The 200-week simple moving average or reversion to the mean is at $375.34. This has not been tested over the last five years. The 12x3x3 weekly slow stochastic reading is rising at 53.76.

Trading Strategy: Away from the day trades, buy weakness to the annual value level at $476.60 and reduce holdings on strength to its monthly risky level at $568.04.