Netflix Inc. (NASDAQ: NFLX) traded lower on Wednesday, breaking below the 645 territory, that way confirming a “Head & Shoulders” formation on both the 4-hour and daily charts, and consequently resulting a short-term trend reversal, in our view. Yesterday, the slide continued below the 620 zone, which provided support between October 12th and 20th, which suggests that further declines are possible.
We believe that the dip below 620 may have opened the way towards the low of October 4th, at 595, the break of which could extend the fall towards the 570 zone, near the lows of September 20th and 21st. If that area is not able to hold, then we may experience extensions towards the 555 area, near the inside swing high of August 23rd and 24th.
Shifting attention to our short-term oscillators, we see that the RSI fell below 30, and keeps pointing down, while the MACD lies below both its zero and trigger lines. Both indicators detect strong downside speed and support the notion for further declines in this stock.
In order to start examining the upside again, we would like to see a recovery back above the 675 zone, which marks the right shoulder of the aforementioned H&S formation. This would confirm a higher high and may see scope for extensions towards the stock’s record of 701. If market participants are not willing to stop there this time around, we could see them pushing towards the 730 area.
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