Netflix, Inc. (NFLX) missed quarterly earnings estimates after the closing bell on April 21. The stock fell to its quarterly pivot at $393.38 and then jumped higher again. The stock is therefore to consolidate above this level and its intraday high of $449.52 all of the 16 April.
The streaming video giant knows that content is king. And Netflix spends a fortune to stay at the top. Global subscribers are on the rise, households across the world are locking because of COVID-19. The stock is not cheap, as its P/E ratio is high at 88.37 without offering a dividend, according to the trends.
Netflix stock closed last week at $435.55, an increase of 34.6% year to date, and in the bull market territory 50.1% above its March 17th low of $290.25. The stock is just 3.1% below its intraday high of $449.52 all of the 16 April. The loss of profit on the part of Netflix has put an end to a streak of eight consecutive quarters in which it had beaten estimates.
The daily chart for Netflix
Refinitiv XENITH
The daily chart for Netflix shows that the shares traded on both sides of its 200-day simple moving average before breaking out to the upside, the 13 April as a facility, which is favorable for a positive reaction to earnings released on April 21. 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 $323.18, on the 13th of March, turned out to be a buying opportunity. This has led to all-time high of $449.52 all of the 16 April. Since this high, the stock has held its quarterly pivot at $393.38 on the weakness.
The weekly chart for Netflix
Revinitiv XENITH
The weekly chart for Netflix is positive, with above its five-week modified moving average of $397.50. The stock is well above its 200-week simple moving average, or “mean reversion”, to $259.90.
The 12 x 3 x 3 weekly slow stochastic reading is finished the last week, an increase of 78.79, of 75.80 on the 1st of May. This reading will probably be overbought this week, with a reading above 80.00 on a scale of 00.00 to 100.00. Note that, in the month of September 2019 low, the stochastic reading was 9.63, below the 10.00 threshold, which defines a stock that is technically “too cheap to ignore.”
Trading strategy: Buy Netflix shares on the weakness of the monthly, quarterly, semiannual and annual value levels at $400.16, $393.38, $381.22, and $314.45.
How to use my value levels and risky levels: The closing price on Dec. 31, 2019, were inputs to my proprietary analytics. Half-yearly and annual, the levels are still on the charts. Each calculation uses the past nine closes in these time horizons.
The second quarter of 2020 the level has been established based on the 31 March, close by, and the level of the month of May was established based on the April 30 close. New weekly levels are calculated following the end of each week, and new quarterly levels occur at the end of each quarter. Half-yearly levels are updated in the middle of the year, while the levels remain in play throughout the year.
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.
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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: investopedia.com
