Is Netflix Ready for Prime Time Ahead of Earnings?

Netflix NFLX is due to report its second-quarter financial results after the close of trading this Thursday.

Let's check out the charts and indicators of the popular streaming service ahead of the print.

In the daily bar chart of NFLX, below, I can see that the shares have begun to pull back ahead of Thursday's report to shareholders. Prices are testing/breaking the rising 50-day moving average line. 

The daily On-Balance-Volume (OBV) line is showing some weakness in July as traders seem to have become aggressive sellers. The 12-day price momentum study has made a lower high from May to June despite the stock price making a higher high. This is a bearish divergence and tells me that the pace of the rally is slowing down and this could foreshadow a correction to the downside.

In the weekly Japanese candlestick chart of NFLX, below, my eye is drawn to the last candle in June and the first candle in July. These two candles almost form a large bearish engulfing pattern (close enough for government work?). The volume pattern shows shrinking volume for much of Netflix's advance and that is not good technically. 

The weekly OBV line shows us a long-term advance that has leveled off in recent months. The 12-week momentum study shows me another bearish divergence but on a larger scale.

In this daily Point and Figure chart of NFLX, below, I can see a potential downside price target in the $591 area.

In this weekly Point and Figure chart of NFLX, below, I can see the same $591 price target as shown on the daily chart above.

Bottom-line strategy: One sell-side firm recently raised their price target for NFLX and upped their estimates for subscriber numbers. Will investors get the news that some are anticipating? Not my area of expertise but the charts suggest we could see lower prices for NFLX in the days and weeks ahead.

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