What to Expect After the Netflix Losing Streak

FAANG stock NFLX tends to outperform after six-day losing streaks

Aug 21, 2018 at 7:54 AM
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FAANG stock Netflix, Inc. (NASDAQ:NFLX) snapped a six-session losing streak on Monday, after the streaming content provider confirmed a plan to test video ads for other Netflix series. While many Netflix users are voicing displeasure with the segmented test -- and while some analysts are concerned about competition and the impact of Netflix's original content on the company's profit margins -- NFLX shareholders didn't seem too concerned yesterday, sending the stock up 3.5% to land at $327.73. What's more, if recent history is any indicator, the FAANG stock could outperform in the next few months.

There have been 25 six-day losing streaks since NFLX stock began trading in 2002, according to Schaeffer's Senior Quantitative Analyst Rocky White. Prior to this month's, the last streak of this magnitude was in late April, just after the stock skyrocketed on strong subscriber growth. Prior to that, you'd have to go back to January 2016 for a losing streak of at least six days. The security's longest losing streak came in March 2014, which lasted 11 days.

NFLX losing streaks since 2010

Historically, NFLX shares have remained weaker than usual the week after six-day losing streaks. The stock averaged a one-day and one-week loss after these streaks, and was positive just 41.7% of the time. That's compared to an average anytime one-day and one-week gain for the shares.

However, one month after a streak, NFLX stock was up 6.34%, on average, and higher 62.5% of the time. That's compared to an average anytime one-month gain of 4.53%. Three months out, Netflix shares were up 19.06%, on average -- exceeding their average anytime three-month return of 14.77% -- and higher two-thirds of the time.

NFLX after losing streaks since 2002

In conclusion, if past is prologue, now could be an opportune time to jump on the FAANG stock's next leg higher. As we mentioned last week, the shares have pulled back to their 160-day moving average, which has had bullish implications in the past. The stock also tested a foothold in the $315 area -- representing a 61.8% Fibonacci retracement of its rally from a January bull gap to its June 21 record high of $423.20. Another 19.06% jump in the next three months would place the security around $390.

NFLX stock chart aug 21

 

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