Netflix’s fundamentals remain solid on the surface. Revenue is still growing, profits continue to improve, and the company is adding new content and features such as its ad-supported tier. The big question investors are asking is whether this pace of growth can continue. After years of rapid expansion, Netflix is now a mature player in a crowded streaming market, and adding new subscribers is becoming more difficult each year. Content costs remain extremely high, and major strategic moves such as entering live sports or acquiring large assets require heavy spending with no guaranteed payoff. Because the stock trades at a premium valuation, Netflix must continue delivering strong results simply to meet expectations.
At the same time, there are growing concerns that Netflix could lose momentum. Competition across the streaming space remains intense, and consumers are more sensitive to subscription prices than they used to be. If subscriber growth slows, margins tighten, or content spending rises too quickly, the stock becomes vulnerable, especially since many investors already see it as priced for perfection. Technical weakness, including declining relative strength, reinforces this caution by signaling waning enthusiasm. Investors are not necessarily turning bearish, but they are becoming more aware that Netflix is no longer a guaranteed growth engine and that solid execution is required to avoid slipping.
From SIA’s perspective, we work with the reality presented by the data. Our main coach, Relative Strength, gave SIA practitioners an excellent entry near the post split $50 level, where shares rallied to roughly $130 and stayed in the SIA favored zone for more than two years before falling back into the neutral zone and eventually into the unfavored zone. This shift reflects the opposite and sell side relative strength decline that prompts SIA practitioners to rotate into a higher RS name.
The second chart, the weekly candlestick view, adds further clarity. It shows the moving average crossovers that many technicians rely on to assess trend direction. A bullish crossover appeared in late 2022 near the $30 level, after which price remained above the 50-week moving average for almost two years. More recently, and consistent with the relative strength deterioration, the 21-day exponential moving average is close to producing a bearish crossover. Also important is the noticeable increase in volume that accompanied the earlier bullish crossover and the similar volume surge now appearing as the bearish crossover approaches.
The attached point and figure chart with the SIA Matrix Position Chart overlay provides a clear illustration of the textbook relative strength surge that occurred in late 2023. During that period, shares moved into the green favored zone of the SIA Report, specifically within the SIA S&P 100 Index and NASDAQ 100 Index Reports. Even when sellers temporarily gained control, the pullbacks were consistently smaller than those of the broader market. This behavior reinforced the strong relative strength profile and allowed RS-based advisors to remain confident in the position. The most recent reversal, however, is very different. Shares of NFLX are now falling more than the market on weak days and rising less on strong days, which is the exact opposite of the pattern that supported its leadership over the past several years.
When relative strength is reviewed from another SIA perspective, SMAX, the picture weakens further. SMAX now shows NFLX underperforming against a broad basket of alternative asset classes including cash, bonds, commodities, currencies, and major equity indexes, earning a low score of 1 out of a possible 10. This, combined with the low sector level ranking within the SIA Sector Matrix, where Media has moved into the unfavored group, points to an eroding relative strength environment where advisors may find better opportunities elsewhere.
For those who continue to hold NFLX for longer term reasons, potential resistance may appear at the point and figure 3-box reversal level of $105.80 and the triple bottom breakdown area near $116.81, with the all time high at $134.17 acting as the upper resistance zone for bullish traders. On the other side, supportive point and figure levels may emerge at $85.09, $68.43, $47.91, and along the long term trend near $34.22.
Disclaimer: SIACharts Inc. specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investors investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIACharts Inc. nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.
