Bears Pile On as Netflix, Inc., Walt Disney Co Test Trendlines

Netflix, Inc. (NFLX) and Walt Disney Co (DIS) are hovering near their respective 80- and 320-day moving averages

by Alex Eppstein

Published on Sep 3, 2015 at 11:43 AM
Updated on Jun 24, 2020 at 10:16 AM

When doing technical analysis, moving averages are extremely important. In fact, pullbacks to key trendlines are among the best indicators to use, based on the past few years' worth of data. Today, we'll take a look at Netflix, Inc. (NASDAQ:NFLX) and Walt Disney Co (NYSE:DIS) to see what recent tests of moving averages may mean for the future.

For starters, NFLX has recently pulled back to its 80-day moving average. Historically, this is a bullish indicator. In the wake of the last six comparable signals, the stock has posted a 21-day return of 23.2%, and has been positive 80% of the time.

More broadly speaking, things have gotten choppy for NFLX, as competition heats up in the streaming content arena -- including a new ad-free streaming option from Hulu. Down 3.7% at $101.53, the shares have lost 21.5% since their early August all-time high at $129.29. Nonetheless, the stock has still more than doubled in value in 2015.

Shifting to the sentiment front, option bears have been sharpening their knives amid the pullback. NFLX's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.09, which ranks in the 92nd percentile of its annual range. Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) stands at a top-heavy 1.45 -- outstripping 88% of comparable readings from the past year.

Turning to DIS, shares of the media giant are again testing their 320-day moving average after bouncing from it last month. In fact, following its late-August pullback to the trendline, the stock rallied 3.7% in the ensuing five days. At last check, the equity was up 0.5% at $102.38, bringing its year-to-date lead to 8.7%.

As with Netflix, Inc., traders have been bearishly oriented toward DIS, based on its 10-day ISE/CBOE/PHLX put/call volume ratio of 1.00 -- in the 85th annual percentile. Likewise, the stock's SOIR of 1.04 outranks all but 13% of comparable readings from the prior year.

On the flip side, expectations are mounting on Walt Disney Co in the lead-up to its new "Star Wars" toy line -- on which it's partnering with Hasbro, Inc. (NASDAQ:HAS). Elsewhere on the news front, DreamWorks Studios will reportedly split from the blue chip following the release of the film, "The BFG."

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