Where Is Netflix (Nasdaq: NFLX) Stock Heading After Earnings?

Netflix NFLX reported earnings after the market today.  Its revenue rose 27 per cent to $1.41bn, in line with analysts’ expectations.  However, its forecast for the fourth quarter was only 44 cents per share, about half the 84 cents forecast by analysts.  In additions, the company only added 3 million new subscribers in third quarter, which is below the 3.7 million new subscribers projected by Netflix.

In after-hours trading, Netflix shares dropped more than 26%, down to $330/share from Wednesday's close of $448.59/share, a whopping $118.59 drop!

In my Ecstatic Plays trading group today, I sent out a message, noting that NFLX could easily fall below $400 after earnings:

Happy Trading Ecstatic Plays NFLX could easily fall below $400 after earnings... 11:16 AM - October 15, 2014 • Premium content

Here's what I saw in the charts:

NFLX

From the chart above, we can see that in the past year, NFLX stock had mainly a trading range from about $320 to $460.  In late January this year, NFLX popped higher from the 1) low end of the range and traded to the 2) high end of the range in early March.  In late April/early May, it dropped again to the 3) low end of the range.  This time, it touched just below $300 before bouncing up.  By the end of June, NFLX was on the upper end of the range again, even breaking above the range for a few days.

In late August, the broader market was so strong, NFLX broke above the trading range and made a new all-time high at nearly $490/share!  But, it soon returned back to within the range.  

Today, NFLX closed below its daily MAs and traded down to $430.  From the chart, there was really no support until $380.  With the weak market environment, a little downward push could easily send NFLX below $400.  Originally, I had thought we would see around $380 tomorrow, but, move down to $320 area within a couple of months.

Instead, we got a severe reaction, and we are back down to the low end of the range overnight!  What we might see tomorrow and over the next few weeks is a possible visit to test $300!

Good night and HappyTrading! ™