It will be a holiday-shortened trading week in the US as markets close for Martin Luther King Day on Monday. The week will also be light on data from the world’s largest economy, with the standout release being the government shutdown-delayed November personal consumption expenditures (PCE) price index report – the Federal Reserve’s preferred inflation gauge. Inflation will also be in the news in Britain, where the consumer price index (CPI) print for December is due out on Wednesday. In Asia, the focus will be on interest rate decisions from central banks in China (on Tuesday) and Japan (Friday), which could have implications for forex markets. Meanwhile, earnings season continues to ramp up, with Netflix among the big names set to report quarterly results.
Netflix Q4 earnings
Tuesday 20 January
Analysts expect Netflix’s fourth-quarter earnings to come in at $0.55 a share, up 29.3% year-on-year, with revenue jumping an estimated 16.8% to $11.97bn. Looking ahead to Q1, analysts see earnings increasing 22.6% to $0.81 a share, with revenue rising 15.6% to $12.2bn. Options markets imply that traders expect shares of the Nasdaq-listed streaming service to move by an average of 6.9% in either direction after the Q4 earnings release. The shares were set to open at about $88.50 on Friday. Implied volatility for the stock is around 70% for options expiring in the trading week to 23 January. That level could continue to rise before the Q4 results are released on Tuesday afternoon in the US. While options positioning appears fairly neutral, it suggests a significant concentration of gamma around $95, with another notable level around $85. This is likely to keep the stock trading in a range between $85 and $95 following the upcoming earnings report, unless there is a major surprise in the results. The technical chart below shows that the Netflix share price has been trending lower recently. However, the relative strength index (RSI), which dropped below 30 last month indicating oversold conditions, has edged up from its December low. This represents a bullish divergence, with the share price falling to lower lows while the technical indicator (the RSI) rises and posts higher lows. This can be a signal that market momentum is strengthening, suggesting that the share price may rise, although such a move is not guaranteed. In terms of the key levels to watch, there is strong support at around $83, while to the upside resistance awaits at $99.
