Will Netflix, Inc. (NFLX) Sell Off on Earnings?

Over the last eight quarters of earnings data available, NFLX has traded with mixed results, moving higher and lower equally, four out of eight sessions immediately following the EPS release. NFLX has been an extremely volatile mover over this same time period, with an average historical move of approximately 16.0%. Currently the options market is pricing in a slightly lower than average move of approximately 11.78% based on the price of the at the money straddle. This would represent about a 40.50 move in the price of the underlying stock by this Friday’s weekly options expiration. On a technical basis, NFLX remains well under the downward sloping Ichimoku Cloud and relevant moving averages on the daily chart. From a fundamental standpoint, Netflix faces continued competitive pressure from rival digital content providers such as Amazon’s Prime service, and Netflix’s membership growth will be closely scrutinized after disappointing numbers in this area last quarter preceded the precipitous drop in share prices. With a confluence of bearish factors in place for NFLX, I will be looking to establish a short position this name going into this afternoon’s earnings release.