Netflix shares recently broke below a double top pattern, confirming that a longer-term selloff is in the cards. Price fell below the neckline support at $93 then reached a low of $78.88 before retracing.
Applying the Fib tool on the latest swing high and low shows that the 38.2% level lines up with the broken neckline and the 100 SMA. This short-term MA is below the longer-term 200 SMA so the path of least resistance is to the downside.
RSI hasn’t quite reached the overbought area yet but is already turning lower, indicating a return in selling pressure. Stochastic is turning down from the overbought levels so price might head south as well.
Strong bearish momentum could lead to a break below the previous lows, although profit-taking is possible around that level. Note that the double top is around $40 in height so the resulting selloff could last by the same amount.
Reports that the State Treasurer of Michigan reduced holdings of Netflix shares is keeping a lid on price gains, as other investors also liquidated their positions. On the flip side, a recent SEC filing indicated that some investment companies and hedge funds added to their holdings of Netflix shares.
Cullen Frost Bankers Inc. boosted its stake in Netflix by 39.7% in the fourth quarter, Concorde Asset Management LLC boosted its stake in Netflix by 18.0% in the fourth quarter, and Dynamic Advisors Solutions purchased a new stake in Netflix during the fourth quarter worth about $431,000.
Overall market sentiment hasn’t been very positive lately, weighing on the FANG shares (Facebook, Amazon, Netflix, and Google). Data from China has been weaker than expected earlier today so there’s a good change that the slide in Netflix shares might resume soon.
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