Thursday's Market Minute: Netflix's Decline Fast-Forwards After Earnings

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Netflix NFLX shares got clobbered yesterday for the second earnings in a row, with its -35% nosedive marking the dubious distinction of the stock’s biggest one-day drop since 2004.

The streaming video company is now down 68% from its yearly highs on November 17, with yesterday’s move taking out previous lows from December 2018 near the 230 level. The plunge also happened on immense volume with more than 133 million shares changing hands, a figure more than 16 times the 50-day simple moving average of volume.

Traders may find themselves at a loss about which price levels could now be important given the magnitude of this move. Technical studies typically lag price and will not fully reflect a sharp drop in price such as this. However, some studies can help traders extrapolate potential support and resistance levels based on price history, such as Standard Deviation Channels.

These channels are created using the Linear Regression Line (a “line of best fit” based on closing prices) as a baseline and help gauge when prices are at a relatively extreme level. Shares blew past the yearly -2 Standard Deviation Channel near 258, so this level could now be viewed as short-term resistance if traders step in to catch the proverbial falling knife today.

Image sourced from Unsplash

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.