Short Trade Idea
Enter your short position between $1,237.50 (the lower band of its horizontal resistance zone) and $1,267.10 (the upper band of its horizontal resistance zone).
Market Index Analysis
- Netflix (NFLX) is a member of the NASDAQ 100, the S&P 100, and the S&P 500 Index.
- All three indices are currently trading near all-time highs amid prevailing bearish signals.
- The Bull Bear Power Indicator of the NASDAQ 100 shows a negative divergence and does not confirm the uptrend.
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Market Sentiment Analysis
Equity markets pushed higher yesterday, but futures trade lower this morning. Still, investors hope that the third-quarter earnings season will keep the AI bubble alive. Positive comments about the potential end of the government shutdown as soon as this week added to bullish sentiment. President Trump noted expectations to reach a fair deal with President Xi next week, but he keeps the pressure high by striking deals with regional partners of China.
Netflix Fundamental Analysis
Netflix is the best-known over-the-top subscription video-on-demand service. It has its own production studios, acquires original programming, and showcases third-party content via its subscription-based streaming services. It also expanded into gaming and live sporting events.
So, why am I bearish on NFLX ahead of its earnings release?
Netflix faces increased competition in streaming, and the recent departure of its Chief Product Officer could create medium-term issues. Rising content costs likely outstrip cautious optimism over advertising revenues, and subscriber growth remains my primary concern. Netflix has impressive operational statistics, but I expect a blow to overly optimistic earnings data to force a sell-off.
Netflix Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 52.91 makes NFLX an expensive stock. By comparison, the P/E ratio for the NASDAQ 100 is 38.08.
The average analyst price target for NFLX is $1,349.88. It suggests moderate upside potential, but medium-term downside risks are high.
Netflix Technical Analysis
Today’s NFLX Signal
Netflix Price Chart
- The NFLX D1 chart shows price action moving into its horizontal resistance zone.
- It also shows price action trading between its descending 50.0% and 61.8% Fibonacci Retracement Fan.
- The Bull Bear Power Indicator is bullish with a descending trendline.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- NFLX struggled as the NASDAQ 100 recorded all-time highs, a significant bearish signal.
My Call on Netflix
I am taking a short position in NFLX between $1,237.50 and $1,267.10. The departure of its Chief Product Officer, high content costs, and increased streaming competition could outweigh advertising revenues as Netflix reports its third-quarter earnings after the bell today.
- NFLX Entry Level: Between $1,237.50 and $1,267.10
- NFLX Take Profit: Between $1,064.50 and $1,082.62
- NFLX Stop Loss: Between $1,302.26 and $1,349.88
- Risk/Reward Ratio: 2.67
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