FAANG Stock Putting Up a Buy Signal

A bullish signal just sounded on the charts, too

Digital Content Manager
Jun 4, 2019 at 12:33 PM
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Streaming giant Netflix, Inc. (NASDAQ:NFLX) has seen a rough past couple of days, as regulatory concerns weighed on FAANG stocks. Plus, at Friday's close, the equity had clocked four straight weeks in the red, and dropped beneath the $340 region yesterday for the first time since early February, ending at $336.63. The shares have recovered some of these losses today, however, up 4.1%, at $350.52 on a bull note from Loop Capital. The brokerage firm upgraded NFLX to "buy" from "hold," predicting a 25% jump in the shares, calling the tech stock's lead in streaming subscriptions "unstoppable." 

What's more, this recent negative price action has a bullish signal sounding on the charts. Specifically, NFLX just came within one standard deviation of its 140-day moving average after a lengthy period above the trendline. According to Schaeffer's Senior Quantitative Analyst Rocky White,  this signal has flashed five other times in the past three years. The equity was higher one month after 80% of these signals, averaging a 6.7% gain.

NFLX Jun 4

Loop Capital's upgrade isn't completely out of left field, though. At yesterday's close, a whopping 21 analysts called NFLX a "buy or "strong buy," while only five gave it a "hold" or worse rating. Plus, the security's consensus 12-month target price of $388.62 sits in territory that hasn't been touched since July 2018. 

Options traders on the other hand, have been betting on more downside lately. NFLX sports a 10-day put/call volume ratio of 0.86 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 89th percentile of its annual range, which suggests that puts are being bought to open relative to calls at a much quicker clip than usual. A shift in sentiment might help to put even more wind at the security's back, should today's positive price action continue. 

 

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