Streaming services are under increasing pressure as competition intensifies and consumer preferences shift. In this rapidly evolving landscape, companies like Netflix, Inc. (NASDAQ:NFLX) face critical moments that could influence their market positions and investor sentiment.
Shares of Netflix are slightly lower on Friday and are sitting on a critical support level. They could be setting up for a tradable move.
Many traders are watching to see which direction the next trend will go. This is why Netflix is our Stock of the Day.
The best traders try not to have opinions. They wait for the market to tell them what to do, and then they react.
Stocks tend to make tradeable moves after they reach important price levels. This may soon be the case with Netflix. As you can see on the chart, it is trading right at support around the $1,200 level.
It is unlikely that the shares will stay at this level for an extended period of time. The odds are much greater that it will rally off the support and go higher, or break the support and head lower.
Support is a price level or narrow range where there is a significant amount of buying interest.
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Stocks can move higher off of support because of anxious buyers outbidding each other. These buyers become impatient and worry that someone else will be willing to pay a higher price than they are.
As a result, they increase their bid prices. Other impatient and worried buyers see this and do the same. This bidding war can force the stock into an uptrend.
But sometimes when a stock is at support, the sellers eventually overpower the buyers, and the price drops below it. When this happens, traders say that the support has “broken.”
Moves lower tend to follow breaks of support.
Support breaks are bearish because they show that the buyers who created the support have left the market. They have either finished or canceled their orders.
With this large amount of demand out of the way, the stage is set for a move lower. Sellers will need to offer their shares at a discount to attract buyers, which could result in a downtrend.
The best traders have reactionary mindsets. They will wait to see what the next trend is in Netflix before taking a position.
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