Netflix May Have Just Killed The Big Stock Market Rally

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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July 16, 2020

STOCKS – NFLX, ADBE, AMZN, AMD

MACRO – QQQ,

Mike Reading The Markets Premium Content – $35/Month or $300/Year

Stocks fell today with the S&P 500 dropping by about 35 basis points, while the QQQ ETF dropped by around 70 bps.

NASDAQ (QQQ)

The QQQ continues to move towards the lower end of the trading channel, which suggests there are more days of declines ahead for the ETF.

Netflix (NFLX)

More importantly, Netflix reported weaker than expected results, with revenue beating and earnings missing estimates. The big story was that guidance for the third quarter missed, with revenue guidance of $6.32 billion, versus estimates for $6.39 billion, a rounding error.  But subscriber additions were expected to be around 5.4 million. Instead, guidance was for 2.5 million. 

But more significant was the one line in the release that I fear is something we may hear from many of these stocks that have had monster runs: “However, as we expected, growth is slowing as consumers get through the initial shock of Covid and social restrictions.” 

Growth is slowing; something a growth investor never wants to hear from their growing companies. It could very well be a trend we see across the spectrum of technology stocks that have seen a big run-up. The message, the easy benefits from the pandemic, has been made; it will get harder going forward.

For now, support for the stock is around $450, and resistance around $480, I suspect the stock has further to fall, beyond $450. 

AMD (AMD)

AMD has been stuck in a trading range recently, and traders are now betting the stock falls. The chart indicates it could fall back to $49ish. (Premium content – AMD May Be Ready For A 10% Drop)

Amazon (AMZN)

For now, Amazon is holding the uptrend. I think it doesn’t for much longer. I still think it heads even lower to maybe 2,460. (Premium content –  Amazon Traders Betting Shares Plunge Following Results)

Adobe (ADBE)

Adobe is another one of these software names that has broken it an uptrend and on its way down. It may fall to around $388 on its first stop. 

Ok – See ya

Mike

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results. 

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