Shorts Retreat Ahead Of Netflix Earnings

Earnings season is in well underway, and next up in the confessional is streaming leader Netflix (NFLX). The Amazon.com (AMZN) Prime rival is slated to report its fourth-quarter earnings after the closing bell today. Historically, NFLX has a grim post-earnings performance. Below we will take a closer look at how the equity has been faring on the charts of late, as well as what analysts are pricing in for the incoming report.

Looking at the stock’s chart performance, there has been much improvement over the last year. In fact, the shares have tacked on 42% in the last nine months, thanks in part to the supportive 20-week moving average. The security managed to move above this former trendline of resistance back in August, as well as the $210 level, which also moved in as a temporary mode of support.

Weekly chart of NFLX since Jan 2022 with 20-week moving average

Refinitiv Eikon

During the past two years, Netflix stock closed lower following five of its last eight reports, including a steep 35.1% nosedive in April 2022. Within this time frame, the shares averaged a move of 13.4%, regardless of direction. This time around, options traders are pricing in a similar 13.5% shift for Thursday’s trading.

It’s worth noting that short sellers have been retreating, with short interest falling more than 19% during the most recent reporting period. This accounts for just over 2% of the stock’s total available float and would take shorts less than a single trading day to buy back their bearish bets.

Netflix stock’s Schaeffer’s Volatility Scorecard (SVS) is on the rise, last seen at 77 out of 100. In simpler terms, this means the streaming giant has exceeded option traders’ volatility expectations during the past 12 months.