Why the Netflix, Inc. (NFLX) Losing Streak Might Not Be All That Bad

Netflix, Inc. (NFLX) isn't the only S&P 500 Index (SPX) component hitting a rough patch

by Andrea Kramer

Published on Sep 4, 2015 at 3:15 PM
Updated on Sep 4, 2015 at 3:24 PM

The Netflix, Inc. (NASDAQ:NFLX) losing streak is getting a lot of play in the media today, but it isn't the only S&P 500 Index (SPX) component hitting a rough patch. What's more, a closer look at the streaming media concern suggests things might not be as bad as they seem. 

150904_Streaks

According to Schaeffer's Senior Quantitative Analyst Rocky White, eight SPX members have endured losing streaks of four days or more -- though that seems relatively mild, considering recent events. Dollar Tree, Inc. (NASDAQ:DLTR) wrapped up its sixth straight loss yesterday -- the biggest of the bunch -- but is sitting 1.2% higher at $67.81, at last check, thanks to an upgrade to "buy" from "neutral" at BofA-Merrill Lynch.

Moving on, finance firms make up three of the eight stocks on our list. Among them, Affiliated Managers Group, Inc. (NYSE:AMG) is tied with NFLX at five straight losses, and is on pace for its sixth, down 2.6% at $172.98. The equity just hit a two-year low of $170.17 on Aug. 24, during the broad-market meltdown, likely to the delight of short-term options traders. The stock's Schaeffer's put/call open interest ratio (SOIR) of 2.40 stands in the 99th percentile of its annual range, implying that near-term options traders have rarely been more put-biased.

Fellow Wall Street firm Legg Mason Inc (NYSE:LM) is also tied with NFLX and AMG, and is bracing for a sixth straight loss, down 2.5% at $41.32. The stock touched a new annual low of $40.60 on Aug. 24, and short sellers have been piling on amid the downtrend. Short interest on LM surged nearly 25% during the past two reporting periods, and now represents nearly a week's worth of pent-up buying demand, at the security's average pace of trading.

Navient Corp (NASDAQ:NAVI) rounds out the finance names on the list, set for a fifth straight drop, down 2.4% at $11.86. In fact, the equity touched a record low of $11.79 earlier today, and has surrendered more than 45% in 2015. It's no surprise to find the stock's SOIR docked at 3.96 -- just 3 percentage points from an annual high.

Considering the recent gold rout, it's also no surprise to see Newmont Mining Corp (NYSE:NEM) on the list, with four consecutive down days. Gold stocks are taking it on the chin again today, due to ramped-up Fed jitters, with NEM sitting 4.1% lower at $15.52, and on pace for its lowest Friday close in more than a decade.

Oil-and-gas names Kinder Morgan Inc (NYSE:KMI) and Noble Energy, Inc. (NYSE:NBL) have also logged four straight losses. While KMI is set to extend that to five, down 1.5% at $30.63, NBL is attempting to snap its streak, up 1.8% at $30.76. Both equities hit multi-year lows on Aug. 24.

NFLX, meanwhile, is on pace for its sixth straight loss -- tied for its second longest in more than a year. The stock is 3.2% lower at $98.87, due to broad-market headwinds, but could find a foothold atop its 20-week moving average, which has ascended into the $98 region. This trendline hasn't been breached on a weekly closing basis since mid-January.

In the options pits, NFLX traders have picked up puts over calls at a near annual-high clip during the past two weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Peak put open interest in the front-month series is found at the out-of-the-money September 95 strike, with more than 24,000 contracts outstanding. This abundance of bearish bets could also act as a short-term foothold for NFLX.

Plus, among the stocks on the Losing Streak list, NFLX is the only one that has outperformed the broader SPX during the past three months. It's also the only stock in positive year-to-date territory, and even with its recent dip, has more than doubled in 2015. Should the stock bounce off multi-layered support, or should some bears hit the exits, now could be an opportune entry point to go long. 


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