Death Cross for Netflix

Netflix’s (NASDAQ: NFLX) 50 day simple moving average (SMA) has been slowly (even painfully some might say) creeping towards its 200 day SMA.  Last week, the 50 day SMA actually crossed the 200 day SMA downwards, this event is known by technical analysts as the “death cross”.  It denotes a long term reversal in the performance of a stock.

Last August, Apple (NASDAQ: AAPL) had its death cross moment and since then the stock has been down as much as 13%.  Apple’s stock death cross took place after coming down from its highs of nearly $135 per share.  The stock is now around 30% off  its highs.

Although Apple’s death cross was somewhat unexpected (it was precipitated by August 24th 2014’s flash crash), any technical analyst would have declared it unavoidable based on market trends.  Netflix on the other hand, has been showing the averages edging towards each other with unavoidable steadiness, like watching a train wreck in slow motion.

So Netflix is officially in bear market territory, what next?

The last time the 50 day SMA crossed the 200 day SMA downwards was as recently as November 2014, and it remained lower until March 2015.  This particular event was driven by two gaps, one in October 2014, and one in January 2015.  These were specific earnings related surprises.  Back then, the stock price dropped 37% from its peak.Fast forward to now, and we don’t see major gaps, but a steady downtrend.

nflx

From its peak in December to its lows in February, the stock dropped 40%, closing below last year’s flash crash.  Forming a support in the $78 – $80 area.  you could go back to April/May 2015 for a repeat of such support.  Should the stock drop below the 78.68 support, the next level is in the 58 to 60 level.

Keep your eyes open for Amazon (NASDAQ: AMZN), it will be the next FANG to face a death cross moment in the near future.

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