Netflix stock drops below the 200-DMA again, but that might not be such a bearish signal yet

Shares of Netflix Inc. sank 7.2% in afternoon trading Wednesday, putting them on track to close below the 200-day moving average (DMA), in the wake of the streaming video company’s disappointing first-quarter results. Many on Wall Street see the 200-DMA as a dividing line between longer-term uptrends and downtrends, but closing below the line hasn’t always marked a bearish turn. While the stock is headed for the third close below the 200-DMA in six weeks, it is still up 3.4% over that time. The stock’s last foray below the 200-DMA was in March 2020, as the stock closed below the line in four times in a five-day stretch, but that marked the post-COVID-19-crisis low. The two times before that the stock dropped below the 200-DMA, in October 2018 and July 2019, led to significant declines. Once difference between the decline that was limited and those that were extended is that with the limited one, the 50-DMA stayed above the 200-DMA, while the 50-DMA crosses below the 200-DMA soon after the stock price did for the extended declines. Currently, the 50-DMA extends to $534.15, according to FactSet, well above the 200-DMA at $514.19. Netflix shares have lost 5.7% year to date, while the S&P 500 has gained 10.9%.

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