Another week comes to a close for traders and it’s been nice for many to get back into the swing of things following the Easter break. In terms of market action it’s been a funny old week indeed. The main theme over the first half of the week was the sharp weakening in JPY which was getting hammered across the board. However, over the middle of the week this theme reversed and JPY has now almost erased weekly losses against its major trading counterparts. So, condolences to any late XXX/JPY longs out there.
Away from the moves in FX markets, the other major story this week was the 30% plunged in Netflix shares. It’s earnings season once again so volatility is to be expected. However, this was a major move for the streaming giant (just not in the direction it would have liked), and is what many traders seem to be talking about as we head into the weekend. So, let’s take a look at what caused the drop and, as ever, if you caught it? Well done! If not? There’s always next week!
What Caused the Move
Netflix Loses Subscribers for First Time in a Decade
The driver behind the loss in market value for Netflix was the company’s Q1 earnings report. In it, Netflix reported the loss of 200,000 subscribers over Q1. The company cited a combination of factors such as a change in habits post-pandemic, people struggling with the cost-of-living crisis, and the rise in competition from other streaming services, net-subscribers over the quarter were down for the first time since 2011. Additionally, Netflix reported a huge loss in subscribers as a result of the Russia-Ukraine conflict.
There have long been grumblings and speculation that Netflix was due to report a loss in subscribers so there will certainly have been a lot of cheering from those placing shorts and buying puts ahead of the release. However, if you missed the move, don’t feel too bad. Hedge fund billionaire Bill Ackman, who bought more than $1 billion worth of stock in Netflix in January, closed out his position for a whopping $400 million loss.
The fear now is that Netflix will continue to lose market share to other streaming platforms. With rising inflation causing many users to rethink their monthly outgoings, many are looking for cheaper alternatives which is a big issue facing Netflix given its recent price hikes for users.
Technical Views
Netflix
The plunge in Netflix shares this week has seen the market trading down to test support around the 203.42 level, just ahead of the bear channel low. With both MACD and RSI bearish, the focus is on a continuation of the channel down towards the 160.65 level near term. With tech stocks coming under pressure from increased Fed hawkishness it would likely take a big shift in narrative for Netflix to recover towards 352.91 where it was trading at the start of the week.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.