NFLX Analysis: Netflix Ending Bull Season?

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In mid-October 2022, the NFLX share price was about $250; in those days we wrote the post “Is Netflix starting a new bull season?”. Since then, the NFLX stock has more than doubled in price. But after the publication of yesterday's news, everything has changed, hence the headline.

The company added nearly 6 million subscribers in the quarter, with a forecast of 1.9 million. As of the end of June, Netflix had 238.4 million subscribers worldwide. This is positive news.

Some negative news: the decline in revenue. While 8.3bn was expected, the actual number is 8.1bn. “While we have made steady progress this year, we still have a lot of work to do to accelerate our growth again,” the company said in a quarterly letter to shareholders.

However, the most serious argument lies in the behavior of the price on the NFLX chart.

NFLX chart

On the eve of the earnings report, we witnessed an increase in the price on rumors of an increase in subscribers. The price of NFLX was close to USD 500, but fell almost 9% post-market after the news. So today the trading session is likely to open below USD 440 per share. This abrupt change in market behavior provides an argument to suggest that the months-long rally has reached a culminating phase. A surge in volatility will help large stockholders take profits — perhaps they see Netflix's difficulties with the strike of actors and authors, increased competition, restrictions on the prospects for further growth.

The median line of the rising channel is now seen as the nearest support, the breakdown of which will confirm the change in market sentiment.

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