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For the first quarter, Netflix (NFLX) said it expects an adjusted EPS of $2.86 per share on revenue of $7.903 billion, which at that time came in under analyst estimates. As Netflix’s earnings date has approached, however, a number of analysts have issued a re-rate based on slower-than-expected growth and the consensus estimate now comes in at $2.89.

From a technical analysis perspective, Netlix’s stock looks neutral heading into the event, needing Wednesday’s candle to print before a direction can be determined. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat. Options traders particularly, those who are holding close dated calls or puts, take on extra risk because the intuitions writing the options increase premiums to account for implied volatility.

The Netflix Chart

When Netflix shot up on Tuesday, the stock was unable to print a high above the most recent lower high, which was formed on April 12 at the $359.41 mark.

If the stock reacts bullishly to its earnings print, it will form a higher high above that level, which would be the first indication a trend change may be in the cards. If a bearish reaction takes place, Tuesday’s price action will serve as a bull trap and the stock will continue to trade lower in its downtrend.

• Monday and Tuesday’s price action, paired with similar price action on March 14 at the $329.82 level, created a bullish triple bottom pattern on the daily chart. If Tuesday’s move higher is a result of the pattern being recognized, the stock would be likely to rise again on Wednesday, if earnings weren’t a factor.
• If Netflix closes the trading day near its high-of-day price, it will print a bullish engulfing candlestick, which could indicate higher prices will come on Wednesday. If the stock retraces down toward the $345 level, it will print an inverted hammer candlestick, which could indicate lower prices are on the horizon and the downtrend will continue.
• On Tuesday, Netflix was attempting to regain the eight-day exponential moving average (EMA) as support. If Netflix is able to trade above the level, it will have room to regain the 21-day EMA as support and if it can remain above both EMAs for a period of time, the eight-day EMA will cross above the 21-day, which would give bulls more confidence going forward.
• Netflix has resistance above at $352.40 and $364.87 and support below at $337.95 and $323.60.

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