NFLX - Matrix Trade

Carving Out a Bottom

Earnings are now priced in, as is the Fed's aggressive rate hike trajectory. With the bad news already out, and an overreaction by the markets, NFLX should now recover and start carving out a bottom. The long downtrend from the all-time high should be coming to an end.

185 is therefore a sustainable bottom for the next weeks and even months as NFLX should rally to test 250 and the large earnings gap. This is likely to act as resistance on the first test and could even lead to one further low (although this is by no means certain|). Once NFLX is above 250, the door should be open for a much larger recovery to 330 to correct the downtrend.

Late trend

NFLX has topped and entered a bear market. In this effect, it has joined the rest of the majority of growth stocks that are unwinding the post-Covid bubble rally. NFLX will find support when its valuation comes in line with the reality of high inflation and tighter financial conditions.

In terms of price action, it is now nearing the end of the strongest part of the downtrend (wave 3) and should slow into the 350 area and then trade sideways in a 350-420 range to set up the last leg of this sequence down to 290-330. From this lower level, NFLX should build a large recovery rally to fill the earnings gap into the 500s.

Reversal / Mature Trend

NFLX has diverged from other FAANGS and could be leading a crash. NFLX has already finished its wave 5 major rally at the 2021 high and the trend-like decline from the all-time high supports this view. Our count actually suggests a major top has formed and will hold for many years. Fundamentally NFLX has run into some big headwinds with increased competition but it is the leading streaming stock by some way and with a huge amount of valuable content, should remain so. A medium-term bottom can be formed in the first half of 2022 in the mid to low 300s, even 290 at a stretch, for a large recovery rally back to fill the earnings gap and target 550-600.