NFLX finally did what the chart told us was inevitable

By Jani Ziedins | End of Day Analysis

Jan 19

Free After-Hours Analysis:

Back in early December, I flagged intriguing price action in NFLX after it continued bouncing off of $475 support. This resilient behavior was even more striking because the company had two disappointing earnings reports during this period. Yet, the stock refused to crash through support.

As I wrote on December 7th:

NFLX had two disappointing earnings reports…and the stock tumbled -6.5% and -6.9% the day after each earnings report. Yet here we stand, still within 10% of all-time highs.

Bad news and a resilient stock? That’s a textbook case for a stock that wants to go higher. Anything that refuses to go down will eventually go up. And right now, NFLX is acting like it wants to go back to the highs. 

Fast forward a month and a half and the company crushed quarterly earnings and the stock surged 12% in after-hours trade.

But this shouldn’t surprise anyone. Earnings are a game of expectations. Two disappointing quarterly reports in a row inevitably lower expectations. Fool me once, shame on you. Fool me twice, shame on me.

And as expected, investors came into this earnings report with much lower expectations. But paradoxically, these lower expectations make it easy for the company to beat expectations. And that is exactly what happened Tuesday evening.

The first part of my analysis proved prophetic. But for readers that missed this move, you’ll be happy to read what I wrote next:

If [NFLX] gets back to the highs, expect it to keep on going.

And I stand by what I said then. NFLX’s six-month consolidation chased off most of the weak holders and the only owners left are the ones who believe in this company. Once the stock gets back to the highs, expect it to keep going.

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.