The NFLX crash was fast and swift. Shares dropped from over $300 to $60 in just about four months. To put this decline into prospective, the rally from $60 to $300 took over 18 months. Now with history aside, it is time to look into the future.

A reasonable target could be the 23.6% Fibonacci retracement level. This retracement level looks to take back 23.6% of the net decline, peak to trough. On the chart, this is the $112ish level. NFLX tested and broke through this level once before, however this was a few months after the massive decline. This rally could have been a function of a short squeeze, because it was right after an emotional crash.

Janney Montgomery analyst, Tony Wible, recently told investors that the stock may rise to $129. This is indeed an interesting target. His target is near the $133 level, which was the February 2012 post-crash bounce back high. On the bullish side, NFLX recently inked a deal with DIS, but one must be cautious however. Looming and realized threats from CSTR, Hulu, and AMZN still are out there and hungry for blood. 

Author

salerno.mark.a@gmail.com

Since Netflix’s last earnings release, shares are up 40.8% and climbing…. but will the rally continue into and after earnings?

Well, when looking at the 5-minute chart its clear that we have a five-wave move down off of the $104.50 highs, indicating a change in trend. After a five-wave move we need to look for a pullback in a three-wave fashion. Well, it looks like we got that off of the bottom of wave (1). There is an a-b-c move that is labeled as (2), that ended at $102.

Now the question is… do we proceed in another impulsive five waves or do we have a more complex scenario playing out?

What looks like the most probable count at this moment, is to look for five waves down. If this is the case we are currently working on wave 2 that should turn down hard from here in a wave 3…targeting the $93 region. If it continues to rise, a move above $100.40 will invalidate this bearish count. But until then, we need to look down until it tells us otherwise.

The second count on the table, which is a little more complex, is a contracting triangle. It’s a triangle that subdivides into five waves, A-B-C-D-E (labeled in red). The main rule for this count is that each sub wave needs to be in a three wave move (zig-zag), no five wave moves! So, if this was to play out we would be seeing a bounce up to the $100 region (wave C) before revering down to $97 (wave D) and ending with wave E ending at $99.50 (below wave C). The drop out of this triangle would be strong and would bring the lower $90 region fairly quickly.

Keep in mind, a move above the $104-$105 region would invalidate all bearish scenarios. But, there should be no reason at this moment in time to look up for NFLX, every count is pointing down for the streaming video giant heading into earnings!

Author: Peter Nitso

pnitso@yahoo.com

Twitter: @PeterNitso

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