Dow Jones Futures: Netflix Stock Hit By Netflix Earnings Guidance; Stock Market Rally Moves On

Dow Jones futures rose modestly late Thursday, along with S&P 500 futures and Nasdaq futures, after the Dow Jones and S&P 500 index cleared a key technical level in Thursday’s stock market. Stock futures took in stride disappointing earnings reports from Netflix (NFLX) and Dow Jones component American Express (AXP). Netflix stock fell, but it came after a huge run-up since Christmas. As investors digest the Netflix earnings guidance, a pullback could set up a buying opportunity for the FANG stock.




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Dow Jones Futures Today

Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures were up nearly 0.3%. Nasdaq 100 futures climbed 0.2%. Remember that Dow futures, Netflix stock and other overnight action don’t necessarily translate in actual trading in the next regular session.

Stock Market Rally

Stocks had a quiet session until a midafternoon report that the U.S. is mulling lifting China tariffs during negotiations. That report was denied by the White House, but the major averages held onto much of their initial pop. The Dow Jones rose 0.7% and the S&P 500 index 0.8%, both closing above their 50-day moving averages for the first time since Dec. 3. The Nasdaq composite rose 0.8%, continuing to climb from its 50-day average. A few more top stocks broke out of bullish bases, a good sign for the stock market rally.

Netflix Earnings Report

Netflix earnings and paid subscriber growth topped fourth-quarter expectations, though Q4 revenue narrowly missed. Those Netflix earnings are heavily adjusted: the company burned $1.315 billion in cash, triple its cash loss in Q4 2017. Meanwhile, Netflix earnings, subscriber and revenue forecasts for the first quarter were weaker than expected.

Netflix Stock Technical Analysis

Netflix stock fell 3.9% to 339.51 in extended trade. But shares of the IBD 50 member had run up 53% to 353.19 as of Thursday’s stock market close. Netflix stock was due for a pullback of some kind. A pullback can shake out weak holders, setting the stage for big gains as mutual funds must bid up a stock to pry it away from committed holders.

Netflix stock has been consolidating since peaking at 423.20 on June 21. One potential buy point would simply be 10 cents above that old high, or 423.30. Investors also could look at the Oct. 2 peak of 386.80, either as a key resistance level in the long consolidation or the start of a new cup base.

Shares also could be in the early, early stages of forming a handle with its own buy point. A handle must be at least five days long to be proper. Netflix stock has a pseudo handle of only two days. But Thursday night’s after-hours action certainly suggests Netflix stock will fall Friday, adding a third day to the handle.

The overnight action also suggests shares will test their 200-day moving average as well as their fast-rising 10-day line. Finding support around those levels would also warm technicians’ hearts.

If Netflix does form a handle in its current area, it would be above the midpoint of either the consolidation starting in late June or in early October. That would provide an actionable buy point of 358.95.

Keep in mind that Netflix stock could ignore extended trade and power higher. Or, as investors mull Netflix earnings and subscriber guidance more, they could sell shares sharply over several days or weeks. Watch Netflix stock, but wait for a breakout from a proper entry in a confirmed stock market rally.

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