As Netflix Heads Into Q2 Earnings Print — Here's What The Chart Is Saying

Netflix, Inc NFLX will kick off big tech earnings on Tuesday when it prints its second-quarter financial results after the market close. The heavily beaten-down stock spiked up about 5% heading into the event but remains down over 70% from the Nov. 17, 2021 all-time high of $700.99.

When the streaming giant printed its first-quarter results on April 19, the stock was trading in a downtrend, but the earnings release accelerated the move and Netflix gapped down 31% the following day. The reaction to its first-quarter earnings print was similar to when Netflix printed its fourth-quarter results on Jan. 20, which resulted in a 21% gap down the following day.

For the first quarter, Netflix reported earnings per share of $3.53 on revenue of $7.87 billion. Although Netflix missed the Street’s estimate of revenue, the massive drop was due to the company reporting a loss of 200,000 subscribers for that quarter.

For the second quarter, analysts expect Netflix to report earnings per share of $2.96 on revenues of $8.04 billion. In April, Netflix forecast a loss of 2 million subscribers for the second quarter, and traders and investors will be watching closely to see whether the company was able to retain more or less subscribers than that number.

From a technical analysis perspective, Netlix’s stock looks neutral heading into the event, needing Tuesday’s after-market candle to print before a direction can be determined. 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 intuitions writing the options increase premiums to account for implied volatility.

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The Netflix Chart: Netflix has been trading in a sideways pattern since April 21, bouncing up and down between a support zone at $164.28 and a resistance area at $227.68. Within the sideways trading pattern, Netflix negated its downtrend on Monday, and on Tuesday, the stock made progress in confirming a potential uptrend when it printed a higher low at the low-of-day.

• If Netflix receives a positive reaction to its earnings print, the stock will make a higher high above Monday’s high-of-day just below the $200 mark, which will confirm a new uptrend is taking place. If the stock receives a negative reaction, Monday and Tuesday’s bullish price action will serve as a bull trap and a downtrend is likely on the horizon.
• Netflix has two large gaps below that were left behind after its last two earnings print. The first gap falls between $248.70 and $333.22 and because gaps fill about 90% of the time, it’s likely Netflix will rise up to fill the overhead gaps at some point in the future.
• From a technical standpoint, if Netflix closes the trading session at its high-of-day price, the stock is likely to trade higher again on Wednesday. If profit takers come in late on Tuesday to close the stock near its opening price, the long upper wick on the candlestick could indicate lower prices are in the cards.
• Netflix has resistance above at $200.82 and $212.98 and support below at $186.40 and $178.38.

Photo courtesy of Netflix.