Netflix – Another After-Earnings Pullback
Netflix (NFLX) shares soared higher last October after the company reported earnings. They gapped up 18% initially and then continued to climb over the next three sessions before meeting resistance in the $128.75 area.
A series of high wick or upper shadows began to form on the daily chart, indicating an inability to hold the higher price level and the relative strength index moved into an oversold condition. The stock eventually broke below gap support continuing lower, but just shy of a 50 day moving average retest.
Last month’s positive earnings report saw another gap higher, and it has been followed by a second series of candles that, except for two, reflect instability and an inability to hold the recent highs. Additionally, the relative strength index is once again in an overbought condition, and this time the Chaikin money flow indicator is reflecting distribution into this last stalled earnings rally. A strong upper candle close above the $142.50 level could initiate the start of a second phase in the latest earnings advance, but a break below the $137.50 level could see the stock price close the most recent earnings gap, and potentially retest of the 50 day moving average.