NETFLIX TECHNICALS SUDDENLY WEAKENING – LONGS NEED TO BE CAREFUL SHORT-TERM

NetFlix shares have taken a turn for the worse over the last few sessions – breaking and closing below its short-term uptrend line support at around $465. How bad will it get before the bulls take back over? What we noted in our recent reports on NetFlix, Inc.

: • The bulls were in love with Netflix's ability to put out bullish news / announcements on a consistent basis; they love the company's estimated 2015 revenue growth of 25% to 30%; and, they were comforted by NFLX's very strong technicals. • The bears, meanwhile, were screaming about the company's 70 P/E, 5.84 price-to-book and 17.74 price-to-sales ratios; and, they noted the stock's technically overbought condition. • Technicians set the upside target for NFLX at approximately $550 per share – the upper edge of a long-term uptrend channel; they put support at the short-term uptrend line $446 - $457. Since our last NetFlix report on September 11th, the stock has turned south in a rather “out of the blue” fashion. It broke and closed below the technicians' short-term uptrend line support that came in at $465. All that means is that the stock has shifted to a more neutral stance in the short-term. According to technicians, the first support now comes in at the horizontal line at $417.57. More substantial support, however, comes into play at the $372.90 level – created by both horiztonal line support and the longer-term uptrend line. Resistance for the stock now comes in at the underbelly of the broken short-term uptrend line at around $466 – but that resistance price will increase each day (see the chart). All in all… NetFlix may still be a “buy the dip” situation for traders / investors, but the price at which serious support will come into play is obviously going to be lower than techncians previously thought. Short-term traders are now looking to fade rallies to the broken short-term uptrend line in anticipation of a move down to $418 or $373.