NFLX (Netflix) had its second consecutive negative move after earnings, and it’s third in four quarters after last year’s price collapse. The attached chart shows a regression channel and range we previously established, with a violation to the downside post earnings. Normally this would be enough to step back and wait to see if the range is resumed or permanently invalidated, but there are some signs that it might not be quitting time just yet.
With each of the previous three earnings announcements, including the one that resulted in a positive move, the gap in price action was closed before the next quarter’s earnings. The only exception was the most recent announcement, when the price rebounded to the middle of the regression channel line and stalled (see chart).
This is a positive if you’re bullish, though only a slight one. It may be a nice time to sell puts, as it’s possible to get double-digit returns on capital with substantial room for a down move. Implied volatility is in the 50’s, so there’s premium to be had here.