Netflix Breaks Down as Competitive Pressures Mount

Netflix, Inc. (NFLX) shares fell about 3% during Tuesday's session after Verizon Communications Inc. (VZ) announced that it would provide its unlimited wireless subscribers with a year of The Walt Disney Company's (DIS) Disney Plus for free. The move could provide a boost to the new streaming service that is set to launch on Nov. 12 for $6.99 per month or $69.99 per year.

In addition to Disney Plus, Netflix must content with Apple Inc.'s (AAPL) launch of Apple TV+ on Nov. 1. The new streaming service will provide new originals every month for just $4.99 per month. Consumers purchasing select Apple hardware could also receive a free year of service, including new iPhones, iPads, Apple TVs, or Macs.

The good news is that these services aren't expected to gain any meaningful traction until at least early 2020. At the same time, Netflix recently announced that it would raise $2 billion in senior notes, and analysts believe that management's latest subscriber growth guidance could be a low-ball estimate. Many of these competitive pressures could be priced in to the stock.

From a technical standpoint, Netflix stock fell below trendline support at around $275.00 toward reaction lows at around $265.00 during Tuesday's session. The relative strength index (RSI) fell to 42.05, but the moving average convergence divergence (MACD) continues to lose momentum and could be at risk for a bearish crossover. These indicators suggest that the stock could see more downside ahead.

Traders should watch for some consolidation above reaction lows at $265.00 or $250.00 over the coming sessions. If the stock breaks down from those levels, traders could see a move to fresh 52-week lows. If the stock rebounds, traders should watch for a move toward the 50-day moving average at $284.76 or prior highs at around $310.00, although that scenario appears less likely to occur given the recent bearish sentiment.

The author holds no position in the stock(s) mentioned except through passively managed index funds.