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Market Thoughts: Streaming Wars

Discussion in 'Trade Journals' started by Adriana Lowe, Apr 15, 2019.

  1. Adriana Lowe

    Adriana Lowe New Member

    Joined:
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    Markets ended the week on a high note after several major banks kicked off the earnings season with decent numbers. Chinese export data for March also rebounded, bolstering optimism in the global economy.

    upload_2019-4-15_20-2-8.png
    Chart from Sigma by Hydra X

    The S&P 500 gained for a third straight week, up 0.5% as it rose through the key 2,900 level for the first time in six months, edging that bit closer to its record high. The index continues to grind higher, and is under 2% away from its all-time high.

    upload_2019-4-15_20-2-17.png
    Chart from Sigma by Hydra X

    The Dow finished the week down 0.1%. The DJI traded back down into resistance-turned-support in the 26,100-250 zone. Those held up well, and the index closed above the congestion zone on Friday, buoyed by Disney’s largest single-day advance in a decade.

    upload_2019-4-15_20-2-27.png
    Chart from Sigma by Hydra X

    The SSE closed lower for the week at 3,188.63, and may be forming a second, smaller bullish flag; the market could be gathering steam before making a push towards 3,320-30 resistance.

    upload_2019-4-15_20-2-36.png
    Chart from Sigma by Hydra X

    Disney stock surged 10% on Friday, on its official unveiling of Disney+, a video streaming service. Disney+ will be available from Nov 12 for $6.99 a month or $69.99 a year. $4 less than Netflix’s most popular plan, this is a price point at which Disney hopes it can undercut Netflix – and other competitors – in what has become an increasingly crowded field.

    Wall Street’s reaction to the announcement suggests that old media’s malaise may be slowly lifting. Investors may finally be willing to treat entertainment companies the same as tech companies, i.e. accepting short-term losses in exchange for long-term growth. Disney repriced sharply upwards despite announcing that its new streaming services, Disney+ and ESPN+, will be loss-making for the next half a decade; profitability is not expected till 2023-24.

    Technically, the stock has broken out of a huge ascending triangle dating back to early 2016, to all-time highs. Having gapped up so violently, and into untrammelled territory, there is little meaningful to say from a technical perspective, other than to note that the move leaves: (i) the stock technically overbought; and (ii) a huge gap for the stock to eventually close. $120 should now act as solid support.

    upload_2019-4-15_20-2-48.png
    Chart from Sigma by Hydra X

    Netflix correspondingly fell on Friday, losing as much as $8b in market capitalisation in several minutes of trading, upon Disney’s announcement of its rival streaming service. Ominously for Netflix, Disney is just one of an increasing number of deep-pocked players moving into the video streaming market, all willing to burn cash for years as they grab market share.

    NFLX has broken below a well defined ascending trend line and down out of a bearish ascending wedge. It has also broken below support in the form of the 50-day SMA, which it has traded above since early 2019.

    upload_2019-4-15_20-2-58.png
    Chart from Sigma by Hydra X

    Amazon stock remained largely unscathed, despite the challenge to its Prime Video service. The tech giant also hit the headlines late this week when the retail industry issued forceful responses to the challenge from Jeff Bezos to its competitors to “match our employee benefits and our $15 minimum wage”. Walmart, Macy’s and eBay CEOs each fired back with responses comprising pointed barbs asking Bezos to pay his taxes and to stop competing with his sellers.

    AMZN investors remained undaunted, with the stock having broken above a bull flag and continuing to consolidate just under the $1850 resistance zone.
     

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