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Asset Watch
Tuesday, October 15, 2024
The bulls rejoiced on Oct. 11, as JPMorgan dazzled with its quarterly earnings results. And with the largest bank in the U.S. often an indicator of economic performance, the strength helped boost the case for resilient GDP growth.
But as Netflix is the most anticipated company reporting this week, will it receive rave reviews on Oct. 17?
While its Big Tech counterparts like Microsoft and Alphabet have struggled recently, on Oct. 7 Piper Sandler analyst Matt Farrell said Netflix “is a clear leader in streaming” and “expensive for a reason.”
Farrell increased his price target from $650 to $800 and sees “multiple scenarios to positive estimate revisions” because in a weaker economy, Netflix’s subscription-based model “becomes even more attractive.”
Confirming the breakout to a record high, Netflix closed the last five weeks above the horizontal white line. As a result, resistance has become support, and the milestone bodes well for the technical bulls.
The price action is even more constructive when considering the 5-week (the blue line) and 10-week (the yellow line) moving averages. Both are perched near the recent weekly low, and the latter aligns almost perfectly with the breakout zone.
Consequently, there is strong technical support in the $690 area, which may limit the potential downside.
Because investors sometimes react harshly to negative surprises, a poor earnings print could incite a material drawdown. As such, traders with lower risk tolerances may want to wait until after the results to enter a position.
On the flip side, robust price momentum may indicate fundamental strength and create a positive risk-reward setup for those willing to incur the earnings risk.
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