Tesla and Netflix shares experienced a significant dip on Friday, entering into correction territory and signaling a potential continued decline in the coming weeks. Despite a slight uptick in Tesla’s stock by 0.1% during Friday’s afternoon trading, it hit an intraday low of $255.80, which marked a 12.8% drop from its 10-month closing high on July 18. Meanwhile, Netflix shares fell by 2.5%, trading 10.7% below its 18-month closing high on July 19.
The decline in both stocks was triggered by the release of their late-Wednesday earnings reports, which left investors blindsided. This was evident in the downside gaps observed in the stocks’ charts on Thursday, indicating a drop in value compared to the previous session’s close. Technical analyst Katie Stockton noted that these downside gaps, combined with the flattening out of the stocks’ 20-day moving averages, are signs of upside exhaustion. She predicts a corrective action for both Tesla and Netflix that could last several weeks.
Another indicator of the stocks’ fatigue is the relative strength index (RSI), which shows that while their prices were rising in the past month, the RSIs had already peaked in mid-June at overbought levels. Since then, the RSIs have been trending lower, hinting at a potential downturn.
If Tesla’s stock continues to decline, Stockton suggests that initial support may be found around the $243 level. As for Netflix, initial support could be around $406. Further downside levels to watch for are where Tesla’s widely followed 50-day moving average sits, currently at $235.31, followed by the early-June breakout level of around $215. For Netflix, the late-May breakout level in the $270 area could offer support.
Over the past three months, Tesla’s stock has risen by 59.5%, while Netflix’s stock has jumped by 30.1%. In comparison, the S&P 500 has seen a 10.1% increase.
