Don't Sweat This FAANG Stock Slump

Netflix is currently on a four-day losing streak

Managing Editor
Mar 5, 2019 at 11:54 AM
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While Alphabet (GOOGL) climbs in the wake of a big bull note, fellow FAANG name Netflix, Inc. (NASDAQ:NFLX) has tapered off recently, currently mired in a four-day losing streak. However, this pullback could have bullish implications for NFLX, if history is any guide.

More specifically, Netflix stock closed yesterday near its 40-day moving average. The previous eight times NFLX encountered this moving average after a lengthy stretch above it, the stock averaged a one-month gain of 6.1%, with 75% of the returns negative, according to Schaeffer's Senior Quantitative Analyst Rocky White.

At last check, the security is trading at $351.46, so a pop of similar magnitude would put NFLX back up above $370, territory not topped on a closing basis since early October. Despite the short-term struggles, the FAANG stock still boasts a 31.2% year-to-date lead thanks to a big post-earnings move back in January.  

Daily Stock Chart NFLX

There's a distinct call bias in Netflix's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 103,929 calls in the last 10 sessions, compared to just 75,189 puts. Digging deeper, the March 400 call is home to peak open interest of 8,928 contracts.

Options are certainly an ideal vehicle to bet on more upside for NFLX, with the security's Schaeffer's Volatility Index (SVI) of 33% ranking in the 10th percentile of its annual range. What's more, the stock has been an attractive target for premium buyers over the last 12 months, according to its Schaeffer's Volatility Scorecard (SVS) of 97 (out of a possible 100) -- which means the shares have regularly realized greater volatility than what NFLX option premiums have priced in.

 

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