After a strong reversal to the upside on December 26th, the Netflix stock (NASDAQ: NFLX) experienced a huge amount of buying interest among investors. This sharp uprise lasted till around mid-January, but from there onwards, the stock was just on a gradual move higher, trading within a rising channel formation. On May 13th, NFLX briefly exited the channel through the lower side of it, but after a couple of days, it quickly got back inside. Yesterday, the stock opened with a gap down, dropping below the lower bound of that channel again. The price closed below the 200 EMA on the 4-hour chart, which also adds a negative spin on the near-term outlook, hence why we will stay somewhat bearish, but wait for a confirmation break below one of our key support areas.
Before examining further declines, ideally, we would like to see a clear break and a close below the 342.00 support area, marked near last week’s low. This might spook investors temporarily, as the move could open the door for a possible price-drop to the 327.95 hurdle, which is the low of January 29th. We may see the stock stalling near that area, or even rebounding back up a bit. But if the price remains below the 342.00 zone, this might lead NFLX to another slide, potentially bypassing the 327.95 obstacle and falling to the 318.50 level, marked by the low of January 23rd.
If NFLX suddenly moves back above the lower side of the aforementioned channel pattern and breaks above the 363.80 barrier, marked by the high of May 16th, this could give some hope to more investors. Such a move might open the door to the 375.00 mark, a break of which could also be seen as a good sign for more buyers to join in and lead NFLX to test the 385.00 level. That level acted as good resistance between April 23rd and May 3rd.
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