Netflix (Nasdaq: NFLX)
is scheduled to report earnings after the closing bell tonight
and the consensus estimate is for the company to earn $0.83 per
share on revenue of $1.27 billion. These estimates are up from
the $0.79 the company earned last quarter when the company
surprised analysts. Looking at the daily
Netflix stock chart
below, you see the last earnings report as the stock gapped from
the $330 area up to the $390 area before running all the way up
to the $460 area in March.
Daily Netflix Stock Chart
The blue circle shows how the
had been in a slump heading into the earnings report, much like
it is today. The stock was oversold back in January and had been
in oversold territory until gaining 4.3% on Thursday. We also see
how the low on Tuesday was just slightly below the low in
January, creating a support level for the stock.
Looking at the weekly chart, we see more layers of support
coming into play. Last week's low was $312 which is close to the
high from July 2011. We also see that the low from last week
dipped just below the 52-week moving average which is at $316.06.
That gives us three different layers of support-the low from
January, the former high from 2011 and the moving average.
Weekly Netflix Stock Chart
The other thing worth noting is that the weekly indicators
show that the stock is the most oversold it has been since
September 2012 (as noted by the blue vertical line). I have also
made notations on the RSI chart and the slow stochastic
Turning our attention to the sentiment indicators, the
analysts are not big fans of
. There are a total of 38 analysts following the stock with 10
rating it a "buy", 24 rating it a "hold" and four rating it as a
"sell". It is hard to believe that the analysts are so down on a
stock that jumped from $55 to $458 in 17 months.
The current put/call ratio for NFLX is 0.78 and that is the
lowest reading in the past year. One interesting thing about NFLX
is that the put/call ratio doesn't work the way most put/call
ratios do. Usually when we see a low ratio, it is a bearish sign
for the stock as it means optimism is running high. With NFLX,
the ratio seems to work in reverse.
The stock has bottomed when the put/call ratio has been at its
lows. This could be a result of more option selling than
. What I mean by that is that institutions
or calls and the party on the other side of the trade is a market
maker and market makers will offset their option position with
another position so as to remain neutral on the stock. This would
cause a misleading put/call ratio in that a put seller is neutral
to bullish on the stock rather than bearish. A call buyer is
bullish whereas a call seller is neutral to bearish on the
The bottom line on Netflix is that the stock has three layers
of support below the current level and the sentiment indicators
are indicating that the stock is due for another rally.
Personally I don't like playing a stock ahead of the earnings
report, but if I were going to bet on Netflix it would be a
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