Netflix, Inc. (NFLX) missed quarterly earnings estimates after the closing bell, on Thursday, July 16. The stock gapped below its semi-pivot at $514.13 to the opening today and tested its monthly value level at $485.37.
The streaming video giant knows that content is king. Netflix spends a fortune to stay at the top. The number of subscribers has increased over the COVID-19 lockdown, but the outlook for future subscribers disappointed Wall Street analysts.
Netflix shares closed on Thursday, July 16, at $527.39, up 63% year-to-date and in the bull market territory 81.7% above the March 17 low of $290.25. The stock is down 8.3% from its intraday high of $575.37 set on 13 March. Netflix stock is not cheap, as its P/E ratio is high at 105.92 without offering a dividend, according to the trends.
The daily chart for Netflix
The daily chart for Netflix shows that the stock has been above a cross of gold since Jan. 31, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices will follow. The test of the 200-day simple moving average at $323.34 12 March turned out to be a buying opportunity, which has led to the highest intraday high of $575.37 set on July 13. On March 12, Netflix has also been testing its annual value level of $314.95, the strengthening of the purchasing opportunity.
Following the V-shape of the bottom, the stock followed its 50-day simple moving average most of 23 March to 29 June. The semi-annual risky level at $514.13 first trial took place on 10 July. The stock is stretched at any time of $575.37 on the 13th of July, and the $514.13 pivot has been a magnet between the 14 July and 16 July. The gap lower on July 17 on the negative reaction to earnings has been followed by a test of the monthly value level of $485.37 in the course of the trading day.
The weekly chart for Netflix
The weekly chart for Netflix is positive but overbought, with its five-week modified moving average of $465.74. The stock is well above its 200-week simple moving average, or the return to the average, at $277.89.
The 12 x 3 x 3 weekly slow stochastic reading is scheduled for the end of this week to 81.25, above the overbought threshold of 80.00. In September 2019 low, the stochastic reading was 9.63, below the 10.00 threshold, which defined the stock as being technically too cheap to ignore.
Trading strategy: Buy Netflix stock on the weakness of the monthly value level of $485.37, and reduce holdings on strength of the semi-pivot at $514.13.
How to use my value levels and risky levels: The share price closing price on Dec. 31, 2019, has been an entry to my proprietary analytics. The annual levels of to remain on the charts. The level of the month of July was based on the last nine-month period firm, the third quarter was based on the last nine quarterly closes, and the second half by 2020 the level was based on the last nine to the half-year closes. New weekly levels are calculated following the end of each week.
My theory is that nine years of volatility between the farm are to assume all possible bullish or bearish event for the stock are taken into account. To capture the volatility of stock prices, investors should purchase shares of the weakness of a plan, the value and reduce the holdings of the strength to a risky level. A pivot is a level value of the risk level that was violated in its time horizon. Hubs act as magnets that have a high likelihood to be re-tested prior to their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings has been based on the backtesting of many methods of reading the stock prices of the momentum with the objective of finding the combination that resulted in the least number of false signals. I’ve been following the stock market crash of 1987, so I was happy with the results of more than 30 years.
The stochastic reading covers the duration of 12 weeks, high, low, and close for the stock. There is a row of calculation of the difference between the highest and the lowest compared to the farm. These levels are modified for a fast reading and slow reading, and I found that the slow playback will work best.
The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered as overbought and readings below 20.00 regarded as oversold. A reading above 90.00 is considered to be a “swell parabolic bubble” of the training, which is usually followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered to be “too cheap to ignore,” which is usually followed by a gain of 10% to 20% over the next three to five months.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.