Technical analysis of NFLX
NFLX, the representative CFD based on Netflix, Inc’s shares, has held relatively steady over the last week ahead of the company’s earnings report after hours today. Strong earnings from banks last week kicked off earnings seasons, and sentiment on many big shares including tech remains fairly positive although there are concerns of overvaluation. This technical analysis of NFLX looks at the daily chart.
Netflix’s earnings per share (‘EPS’) were generally somewhat disappointing last year. Actual EPS for all four quarters of 2020 missed expectations by at least a few cents. Meanwhile Netflix’s price:earnings ratio for 2020 was about 92, making it strongly overvalued by this measure.
Technical indicators on NFLX D1
Moving averages continue to give a strong buy signal, with all three of the 50, 100 and 200 SMAs successively above each other and below the price. The relatively small value areas between these might hinder downward movement in the event of a negative surprise from earnings.
While Bollinger Bands (50, 0, 2) do not currently indicate overbought, the slow stochastic (15, 5, 5) at about 82 is slightly within the zone of buying saturation. Volume has been fairly low over the last few sessions, which makes sense in the context of an upcoming earnings report, but unusually for an individual share buying and selling are fairly closely matched.
Price action and Fibonacci
The weakly defined rising wedge from about 8 March would traditionally suggest a sell signal in isolation, but considering the fundamental context this signal should not normally be acted on ahead of earnings. There does seem to be reluctance to push clearly above $550, so a daily close significantly above this area might open the door to more gains in the medium term.
Two Fibonacci fans are visible here, both starting from March 2020’s lows. The higher fan based on July 2020’s might provide targets for some buyers over the next few weeks above 630, while the lower fan drawn based on January 2021’s high could give dynamic support to the price into the end of the week unless tonight’s figures are particularly disappointing.
Technical analysis of NFLX: summary
Netflix, Inc is expected to release its earnings report for the first quarter of 2020 today, 20 April, after hours. The consensus EPS at the moment is $2.98, with the 15 estimates ranging from $2.92 to $3.01. One of the estimates was revised down in the last four weeks.
The technical picture for NFLX overall is fairly positive over the medium term, but with the current overbought signal and clear overvaluation a strong upward movement after earnings is doubtful. Many investors in deliverable shares would usually prefer to enter at a lower price, so for traders of NFLX as a CFD a short-term approach would seem to make most sense at the moment.
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