Schaeffer's Trading Floor Blog

Charts to Watch: Netflix, Inc. (NFLX) at a Critical Juncture

NFLX tests support as it approaches oversold territory

by 3/19/2014 12:27 PM
Stocks quoted in this article:

Netflix, Inc. (NASDAQ:NFLX) has had quite the year, and not just because half of the world's population spent its Valentine's Day watching House of Cards. The shares are up more than 131% in the last 12 months, and have outperformed the S&P 500 Index (SPX) -- on a relative-strength basis -- by almost 26 percentage points during the last two months. During the last month, however, Netflix has lagged the broader-market measure. The stock's recent consolidation has placed it near oversold territory, with a Relative Strength Index (RSI) reading of 43.

This phenomenon is also illustrated by the stock's lower Bollinger Band, atop which NFLX has been trending for the last several sessions. A break of this oscillator could mean a bounce higher is in the cards.

Daily chart of Netflix, Inc. (NFLX) since January 2014 with Bollinger Bands

A longer-term view shows that the equity is also testing potential support at its 10-week moving average. This trendline offered support to the shares last October, but was also briefly violated at the beginning of 2014; specifically, the stock closed two weeks south of this trendline before its late-January earnings-related bounce.

Weekly chart of Netflix, Inc. (NFLX) since May 2013 with 10-week Moving Average

Not surprisingly, bearish investors have been jumping ship on Netflix, Inc. (NASDAQ:NFLX) in recent years. Short interest hit a three-year peak of 17.2 million shares in November 2012, but subsequently backpedaled to its current level of 4.8 million. During this period, as short interest pulled back by 72%, the shares have more than quintupled in value. And still, 8.2% of the stock's available float is sold short. In other words, NFLX could be propped up somewhat by a continued exodus of these short sellers.

Netflix, Inc. (NFLX) Short Interest since March 2012

permanent link
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.