Netflix (NFLX) stock price saw a surge by the end of August, springing up from the low of $400 and retesting $450. The stock price surged roughly 13% and retested the $450 resistance level but was not successful in closing above it.
The bears had a strong presence near $450 and didn’t want the price to rise above it. NFLX stock then entered into a narrow consolidation zone ranging between $440 and $450.
On 12 September 2023, Netflix stock price finally broke the consolidation zone in a downward direction and has been melting for the past two days. The previous candle closed as a strong bearish candle. If bearish momentum prevails, NFLX stock might fall toward the key support level of $400.
On the other hand, if bulls enter the market and form a support at $410, then the stock price might retest $450 and continue its bullish rally toward $500. After the release of the second-quarter earnings report, Netflix stock has witnessed a notable drop due to a miss of consensus revenue estimates.
Why did the Netflix Stock Drop Suddenly?
Netflix CFO Spencer Neumann offered guidance in operating margins in the range of 18-20% range, which is shy of the consensus estimate of 22.1%. Neumann also stated that building an advertising business from scratch is not easy.
Netflix has rolled out an ad-supported tier and a good proportion of accounts are shifting in that direction. Neumann also said that the ad business is not that material yet which turned out to be another drawback for the stock price.
CFO Spencer Neumann also stated that live sports is not something the company will be investing in, at least not in any of the big-ticket sports. The year-to-date return of Netflix stock is 38.31% while the three-month return is -7.71%.
Will NFLX Stock Form a Support at $400?
The stock price has melted below 20 and 50-day exponential moving averages (EMAs), implying a rise in bearish momentum. The 100-day EMA has previously acted as a support for NFLX stock and might hold the price in the current scenario.
Chaikin money flow score has slipped below the 0 mark and currently stands at -0.11, indicating selling pressure over the price. The relative strength index stands at 40.62, suggesting a bearish confluence. The Bollinger bands have expanded indicating a rise in volatility.
The market structure and price action of Netflix stock have turned bearish after facing rejection from $450 and are currently headed toward a key support level of $400. Technical parameters favor the selling side but traders should be cautious as the price reaches near the support level.
Major support: $400 and $360
Major resistance: $450 and $480
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