This is a much simpler chart than we would usually post, but we wanted to describe a very specific concept here. Since July’s earnings release, Netflix (NFLX) has been trading below about $61. This was previously a very important level, as it was a support line that had been tested three times. The earnings report drove the price below this level, but only for a few weeks, now it’s back up close to the line.
This is textbook example of a long-standing support line becoming resistance after being broken, and we’re watching it closely to see if the resistance line holds. There was a $15 gap between pre- and post-earnings prices, and this may be large enough that it needs to be filled, but we’ve yet to see this happen for the previous quarter (in late April).
Best guess is that the $60-$62 range exists as the top for NFLX for some time, until something fundamental about the company changes. We’re not ready to start selling bearish premium yet, but it may be time soon.