It seems like a lot longer but it’s been less than three weeks since media stocks sold off following a round of disappointing earnings. Since then, the focus of traders has shifted away from stocks and sectors followin the end of earnings season to broader drivers like China’s market crisis and interest rate speculation. To no surprise, media stocks have continued to decline over the last three weeks, but performance among the stocks in the group has changed significantly, as shown in the table below: Source: CMC Markets, Bloomberg L.P. During the first week of August Disney, Time Warner, Viacom were all hit hard while CBS and particularly Netflix were able to avoid the earnings storm. The broad market storm, however, has sunk all boats and reduced the gaps with CBS and Netflix getting hit the hardest in the group after August 6th. This action goes to show that in times of market crisis all stocks tend to get hit regardless of fundamental performance or valuation. To put it another way, when the police come to break up a party, everyone gets thrown in the wagon and hauled away. It’s only later down at the station after a cooling off period that the innocent bystanders get separated out from the misbehavers. The chart below shows how all stocks in the group have turned sharply downward in the last month. It also indicates that even after the selloff, over the longer term, Viacom remains the worst performer in the group and even after taking a big correction, high flyer Netflix remains the top performer by a wide margin. Source: CMC Markets What next for media stocks? We’re still working our way through the seasonally weakest time of the year for stocks in general between mid-August and mid-October, so we could still see some volatility. For the media sector specifically, the worst seasonal slump usually runs between the two biggest film festivals of the year from the Cannes Film Festival in May through to the Toronto International Film Festival (TIFF) in September. Source: CMC Markets, Bloomberg L.P. After TIFF, which runs from September 10-20 this year, speculation about the holiday box office and Oscar contenders starts to ramp up, which has historically driven a sector rebound into year end. Some of the potentially bigger movie releases of the fall season include: Spectre (Nov 6) Sony The Hunger Games: Mockingjay Part 2 (Nov 20) Lions’ Gate Star Wars: The Force Awakens (Dec 18) Disney Chart Analysis: Disney Source: CMC Markets Disney spent much of the last year under accumulation but since peaking just above $120.00 near the end of last month and reporting disappointing earnings, the shares have been in free fall. Earlier this week, they dropped to test $90.00 in what looks to have been a selling climax as the shares quickly bounced back above $96.00 in what looks like a bear trap washout bottom. More recently, the shares have started to stabilize in the $95.90 to $101.90 range between the 50% and 62% retracements of the previous major advance, a zone where reversals commonly come to an end. On a breakout from this zone, the shares could retest their 200-day moving average closer to $105.00 but on a breakdown the recent low near $90.00 could potentially be retested. Chart Analysis: Netflix Source: CMC Markets Netflix staged a major six month rally between the end of July, steadily rising in a step pattern of advances followed by consolidation at higher levels, while showing that stocks can stay overbought (in this case) for a long time. After completing a double top in the $120-$130 zone earlier this month, the shares have plunged as a market crunch hit momentum stocks particularly hard. Even high flyers like Netflix aren’t immune in these types of markets because traders often sell their winners to cover margin calls on other positions. On Monday, Netflix successfully completed a common 50% retracement of its previous advance, bouncing up off of $87.50 and into the $102.50 to $109.70 zone between the 23% and 38% retracement levels. Current technical signals are mixed. While it appears to be attracting support above $100.00 with more possible near $97.40, it remains below a gap in the $109.50 to $112.00 area. Also If a rally were to falter near $118.80, it could carve out the right shoulder of a head and shoulders top. On this basis, we could see significant swings in both directions over the next while as bulls and bears vie for dominance.