The Streaming Stock Ready for a Rebound

It looks like a good time to get in on the streaming stock's pullback with options

Deputy Editor
Jul 31, 2020 at 2:00 PM
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    With an earnings miss in the rear view, the shares of streaming giant Netflix Inc (NASDAQ:NFLX) seem to have plateaued -- consolidating beneath the $500 mark in recent weeks, with additional pressure at the 20-day moving average. Though the stock's July 13 all-time peak of $575.37 still looks out of reach from its current perch at $485.68, recent support at a historically bullish trendline has situated itself just below the equity, and could give it a second wind in the coming weeks. 

    More specifically, Netflix stock just came within one standard deviation of it 40-day moving average after a lengthy period above here. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, six similar signals have flashed for NFLX during the past three years. One month after four of these signals, the stock was higher, averaging a return of 6.7%. A similar move from its current perch would put the security at $518.22 -- well above the aforementioned 20-day moving average. 

    NFLX Chart July 31

    Should Netflix stock get another leg up, it could be ripe for a round of bull notes from analysts. Despite a solid 50% year-to-date gain, 12 of the 31 in coverage still consider it a "hold" or worse. Plus, the consensus 12-month price target of $506.69 is just a 4.3% premium to current levels. 

    For those looking to play Netflix stock's pullback with options, now looks like the perfect time to do so. The equity's Schaeffer's Volatility Index (SVI) of 38% stands higher than just 17% of annual readings. This means options players have been pricing in relatively low volatility expectations at the moment. 

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