Pressure from a key technical indicator could be why Netflix shares are falling, according to a chart analyst.
Netflix shares are down 4.2 percent Wednesday.
Bespoke Investment Group told its clients Netflix's inability to stay over an important moving average may have contributed to its sharp decline.
"The FAANG trade is getting hit hard today, with Netflix down … The price chart for Netflix has looked bearish since it broke below its 50-day moving average a few months ago," co-head of research and investments Justin Walters said in a note to clients Wednesday. "The stock recently attempted to re-take its 50-DMA, but with today's decline, it looks like a failed test."
Moving averages aggregate price data over a time period and are used to gauge a security's longer-term trend.
To be sure, Netflix stock's multi-month decline of more than 15 percent from its June high may primarily be a reaction to the company's recent unfavorable fundamentals
On July 17, Netflix shares fell 5.2 percent a day after it reported disappointing second-quarter financial results. The company added 5.15 million memberships during the quarter missing the Wall Street consensus of 6.34 million.
But despite the stock's recent decline Netflix shares have significant cushion so far this year before it underperforms the market. Its shares are up 89.4 percent through Tuesday versus the S&P 500's 8.3 percent gain.
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