Netflix (NFLX) was an important stock to watch before Wednesday's spike for several reasons, and this remains the case now. First, relative to other growth names, it had held up much better in recent weeks. It never dipped below still-rising 200-day moving average, which set it apart from many other names in the communications, consumer discretionary, and technology sectors. In fact, as of the close on Tuesday, 4/8/25, only four S & P 500 stocks with $300B+ market caps were trading above their 200-DMA: BRK.B, V, UNH, and NFLX. (Now there's 11.) Second, NFLX never break below its January support level. That's notable because the S & P 500, Nasdaq 100, and several large market-cap weighted indices undercut similar support zones weeks ago and struggled until yesterday's tariff-induced monstrous advance. If had viewed at NFLX in a vacuum — ignoring the intense broader market volatility — it would have looked like a classic "buy-the-dip" scenario. As is clear on the chart, dips like this have proven to be good buying opportunities within the long-term uptrend over the past year. That said, from a pattern perspective, it's hard to ignore the bearish potential head-and-shoulders formation that had been taking shape. Now, historically, when patterns like this show up during well-established trends, they often do NOT fully play out because demand continues to show up underneath the surface. However, we also have to acknowledge that similar topping formations have already broken down in other key names. This includes META, which fell hard after piercing its breakdown zone (before snapping back to that key supply area on Wednesday) and the XLC Communications ETF (of which both NFLX and META are members), which broke down last week and already reached its downside objective. XLC currently still is beneath its own breakdown zone. The other reason why NFLX is significant, of course, is that it reports earnings next Thursday—It always is among the first major growth stocks to release numbers in the very early stages of earnings season. Even though it's not as directly in the tariff crosshairs as other companies, how the market treats its report—regardless of the results — will send a strong message. Again, NFLX hasn't broken any key levels yet, even though it fell 20% from its highs rather quickly. But that's not far off from other pullbacks over the past year — many of which occurred around earnings and turned out to be good buying opportunities. All of this sets up a very interesting scenario heading into next week's release. Investors' reaction to the results will likely determine whether the potential bearish pattern plays out and could influence how other growth stocks trade through the heart of earnings season, as well. — Frank Cappelleri Founder: https://cappthesis.com Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today's dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You'll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited! DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
