Trading Strategies For Netflix Stock Before And After Q1 Earnings

Netflix, Inc NFLX will kick off big tech earnings on Tuesday when it prints its first-quarter financial results after the market close.

The stock has been trending lower on the daily time frame since April 4, sliding within a downtrend.

When the streaming giant printed its fourth-quarter results on Oct. 18, the stock rallied about 16% over the four trading days that followed, breaking up from a bull flag pattern.

For the fourth quarter, Netflix reported earnings per share of 12 cents, missing the Street estimate of 44 cents per share. The company reported revenues of $7.85 billion, which beat the $7.84-billion consensus estimate.

For the first quarter, analysts expect Netflix to report earnings per share of $2.86 on revenues of $8.18 billion. Traders and investors will be watching closely to see how many new subscribers the company was able to add during the quarter.

From a technical analysis perspective, Netlix’s stock looks neutral heading into the event, trading in an inside bar pattern but on higher-than-average volume, which suggests a battle between the bulls and the bears.

It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders, particularly those who are holding close dated calls or puts, take on extra risk because the institutions writing the options increase premiums to account for implied volatility.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The Netflix Chart: Netflix was printing an inside bar pattern on Tuesday, with all the price action taking place within Monday’s trading range. The pattern leans neutral because although Netflix was most recently trading lower, the overall trend is higher on larger time frames.

• The stock has seen overall decreasing volume, which indicates a large move may be on the horizon. The move, which is likely to take place during after hours trading on Tuesday, will determine the short-term direction.
• On Tuesday, Netflix tested the 50-day simple moving average (SMA) as support and was holding above the area, which is bullish. It is also bullish that the 50-day SMA is trending above the 200-day SMA.
• Netflix was working to print a doji candlestick Tuesday, which when found in a downtrend can indicate a bounce is in the cards. If that happens, bullish traders will want to see the stock rise up above $347 to negate the downtrend and signal a new uptrend may start.
• Bearish traders want to see big bearish volume come in and drop the stock under the 50-day SMA. If that happens, the downtrend could accelerate, and Netflix could fall toward the 200-day SMA.
• Netflix has resistance above at $349.80 and $368.90 and support below at $333.22 and $294.75.

Photo via Shutterstock.