Trading Strategies For Netflix Stock Before And After Q4 Earnings

Zinger Key Points
  • Netflix may be settling into a bull flag, and if the pattern is recognized, the stock could confirm a new uptrend.
  • Netflix has been trending higher since July within a rising channel pattern on the daily chart.

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

The stock has been trending higher on larger time frames since July 13, but has experienced a slight pullback within its uptrend since Tuesday.

When the streaming giant printed its third-quarter results on Oct. 18, the stock rallied over 13% the following day and on Oct. 21, crossed above the 200-day simple moving average, indicating a new bull cycle was in the cards.

For the third quarter, Netflix reported earnings per share of $3.10, beating the Street estimate of $2.13. The company reported revenues of $7.93 billion, which beat the $8.44-billion consensus estimate.

For the fourth quarter, analysts expect Netflix to report earnings per share of 44 cents on revenues of $7.84 billion. Traders and investors will be watching closely to see whether Netflix has been able to meet its guidance for the fourth quarter by adding 4.5 million new paid subscribers.

From a technical analysis perspective, Netlix’s stock looks bullish heading into the event, trading in a long-term uptrend and printing a possible bull flag pattern on the daily chart.

Watch Benzinga's live coverage of the Netflix fourth-quarter earnings call beginning at 5 p.m. at this link, with live earnings reaction, a look at growth drivers and Netflix's earnings call beginning at 6 p.m. ET Thursday. Wedbush analyst Michael Pachter will join the broadcast at around 5:45 p.m. 

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.

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The Netflix Chart: Although Netflix is trading in a long-term uptrend and has negated a short-term downtrend, an uptrend on the daily chart hasn’t yet confirmed. If Netflix receives a positive reaction to its earnings print and spikes higher on Friday, Thursday’s low-of-day will form a higher low, which will confirmed a new uptrend.

  • If Netflix suffers a bearish reaction to its financial results and falls lower on Friday, the stock may found support at the lower ascending trendline of a rising channel in which Netflix has been trading since July. Netflix eventually crossed under the trendline, and it is likely to find strong support at the 200-day SMA.
  • On Thursday, Netflix was working to print a dragonfly doji or hammer candlestick, which may indicate the stock will trade higher on Friday. If that happens, bullish traders want to see the stock rise above $33.665, which would cause Netflix to print a higher high.
  • Netflix has resistance above at $333.22 and $368.90 and support below at $294.75 and $265.80.

Photo via Shutterstock. 

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