Netflix Technical Analysis Before Earnings
Streaming platform Netflix, Inc (NFLX) is set to report earnings after the market closes on Thursday, October 17th. Analysts expect earnings of $5.07 per share on $9.76 billion in revenue. The whisper number places earnings at $5.17, a beat of $0.10 per share.
In terms of stock performance, Netflix has blown away its competition. Competitor streaming services like Paramount Global (PARA) and Warner Brothers Discovery (WBD) are near multi-year lows while Netflix has been making new-all time highs almost weekly. Based on probability, this puts Netflix at a disadvantage going into earnings. Expectations are extremely high for Netflix because the stock price keeps going higher. To justify the current price, they will have to blow the whisper number away and guide higher.
The technical chart is also a risk. It is trading in a tight bearish wedge while inside of a bigger wedge with a negative RSI divergence. While it is not impossible for Netflix to go higher on earnings, the upside is capped. With current price at $722.79, there is resistance at $740.00 and $765.00. This limits the upside to between 1.7% and 6%.
However, on the downside, should Netflix break below $710.00, it could collapse as low as $645 before finding major technical chart support. This means downside risk is almost 11%.
Based on the RSI negative divergence, the bearish wedge and the risk/reward, investors may want to think about shorting Netflix into earnings on Thursday.
