Netflix Stock Confirms A Head And Shoulders Pattern: What's Next?

Netflix Inc NFLX shares are trading lower Thursday after JPMorgan maintains an Overweight rating on the stock and lowered the price target to $725.

Netflix has just fallen below support in what traders call a head and shoulders pattern, adding to the bearish sentiment the stock has been experiencing.

Netflix was down 1.67% at $558.02 Thursday at publication.

See Also: Read Why This Fund Manager Sees ViacomCBS Cheaper Compared to Netflix, Roku

Netflix Daily Chart Analysis

• Shares have fallen below the support line in what traders call a head and shoulders pattern. This happens when the stock is unable to make a peak with a new high price, showing a bearish trend of lower highs that may be starting.
• The stock trades below both the 50-day moving average (green) and the 200-day moving average (blue). This indicates bearish sentiment and each of these moving averages may hold as an area of resistance in the future.
• The Relative Strength Index (RSI) has been falling for the past few months and now sits at 25. This is well into the oversold region and it shows that sellers have been dominating the stock. If the RSI continues to stay oversold the stock price will continue to fall lower.

What’s Next For Netflix?

Netflix formed into the head and shoulders pattern and when the price dropped below the support level near $575, the pattern was confirmed. Falling below this level was a key indicator the stock was due for a further strong bearish push. Bears are in control of the stock and would like to see it continue to fall and hold below the moving averages. Bulls are looking to see the stock bounce and start to form higher lows on the chart. Higher lows may show a long-term bullish trend is beginning.