Simplistic technical Analysis for NFLX (19th October 2014)

Last week when Netflix announced its earnings, it fell in a free-fall to almost $330 from $455 odd. The company had missed earnings, missed adding new subscribers at the rate it was anticipated, as well as given a lower guidance for the year.

Many long term investors jumped ship after hours, leading to a massive drop in the price. The stock wiped off all the gains it had made since April.

Looking at the 1 year chart some interesting things emerge...

1. A typical precipitous drop takes 7 to 9 weeks to recover. Stock has recovered in 7 to 9 weeks in the last year everytime it has dropped 20 to 30% .

2. There is long term support between 320 and 330.

3. There are resistance levels at 400 and 450.

Given these indicators, I suspect, we will find the stock above 375 and most likely below 400 in 4 weeks time.

Looking at the 2 year graph, we can see that the stock has not stayed below the 200 day SMA for too long.

Given that the 200 day SMA has been on a positive slope for the past 2 years, it seems unlikely that bulls will reverse their thesis for too long. In fact, bulls may see it a buying opportunity to take bigger positions, which will see the stock slowly trend upwards.

Lets see how it pans out.