Why Netflix Stock Looks Set to Rebound Despite Falling Revenues and Job Cuts

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Netflix, Inc. NFLX was trading slightly higher in pre-market Friday after closing Thursday’s trading session up a modest 1.58% against the S&P 500, which closed up 0.95%.

On Thursday, Netflix laid off 300 additional employees across several divisions of its business, mostly in the United States, amid slowing revenue growth.

When the streaming giant released its first-quarter financial results on April 19, Netflix announced its first loss of subscribers in over 10 years, with a loss of 200,000 subscribers.

Big tech companies have begun cutting jobs and freezing hiring as inflation soars and the United States heads into a recession. Tuesday, Tesla Inc. TSLA CEO Elon Musk confirmed that the electric vehicle giant will cut its salaried employees by 10% over the next three months in favor of growing its hourly-paid workforce.

In September 2021, Benzinga conducted a survey to ask how many of its subscribers had paid for three or more streaming services, with 53.4% ​​of respondents indicating they had. The number of streaming services people subscribe to has likely dropped since COVID-19 stay-at-home orders were in effect and Netflix may not have made a difference for some.

Netflix is ​​expected to release its second quarter results on July 19, and traders and investors will be watching to see if the worst is over for the company or if it continues to lose subscribers.. With people likely finding they have less time to stream after returning to the office and less disposable income due to soaring inflation, traders will likely prepare for the worst.

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The Netflix chart: On Thursday, Netflix printed a bullish engulfing candlestick on the daily chart, indicating that the stock should trade higher on Friday. If Netflix is ​​trading higher, bullish traders will want to see the stock gaining momentum to break above the $183.85 mark, which would then confirm that the stock is trading in an uptrend.

  • For now, Netflix is ​​trading sideways between $164.28 and $183.85, with most of the price action taking place on average or below average volume. This indicates that there is moderate or below normal interest in the stock.
  • Netflix is ​​likely to bounce higher over the next few days if the stock can break out of the sideways trading channel as an exaggerated bullish divergence has occurred on its chart. Exaggerated bullish divergence occurs when a stock is trading sideways but its Relative Strength Index (RSI) is making a series of higher lows. For the divergence to correct itself, Netflix will need to rise significantly higher or fall for the RSI to trend lower.
  • Netflix has upper resistance at $186.40 and $200.82 and lower support at $178.38 and $164.28.

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