About a month ago I posted about the potential weakness developing in NFLX, and since that time we’ve seen the stock move lower. Now, as I look at the charts again, I think there are fresh signs that this weakness may not be finished yet.
Above is a daily chart of NFLX, and below that is the SPY for comparison. One of the most important things I always look for is how a stock behaves relative to the broader market. From points A to B on the chart, the SPY pushed to a new high, signaling continued strength in the market. During that same period, however, NFLX was unable to make progress. Instead of confirming the market’s strength, the stock moved sideways, carving out a tight consolidation range.
That type of action is often an early warning sign. When the market is strong but a stock can’t participate, it usually means sellers are quietly distributing shares. Now we’re starting to see that consolidation resolve to the downside, with NFLX breaking lower in a way that closely resembles the relative weakness we saw back in early December.
From here, I think the risk remains to the downside. The next key area I’m watching is the psychological $90 level. If NFLX cracks below that level, I believe lower prices are likely in the days ahead, especially if the market begins to lose momentum as well.
This is another good reminder of why relative strength analysis can be so valuable. It often gives us clues about future price direction well before the move becomes obvious.
I’ll continue to monitor how NFLX behaves versus the SPY, as that relationship should tell us a lot about what comes next.
If you’d like to revisit my original analysis and see why NFLX first appeared on my radar, you can read my earlier post here.
No comments:
Post a Comment