What Is the Netflix-Roku Deal? Here's How to Trade Both Stocks

What Is the Netflix-Roku Deal? Here's How to Trade Both Stocks ...

Get Roku Inc. Reportshares are up more than 12% on June 8, while Netflix (NFLX) - Get Netflix Inc. Reportis is at a session high, with 3.5 percent growth.

Wall Street is speculated that Roku may be acquired by Netflix. In premarket tradingRoku shares were modestly higher while Netflix was down.

Considering both of us being on the verge of being higher, it might suggest that investors and the market approve of such a transaction, assuming that one is in the works.

Netflix has a robust subscriber base (and even more potential if Roku loses ground on password sharing). Roku has a dominant streaming-video operating system/platform, a solid presence in video ads, and is rapidly improving its operating profit and margin.

Both stocks have experienced a peak-to-trough decline of 75 percent, according to both reports.

While one might argue for the transaction, what are the charts saying?

Trading Roku Stock

Roku''s stock is shown on a daily basis.

TrendSpider.com has provided a chart.

The above table appears to be a lot of work, but it highlights both the daily and the weekly levels, while highlighting the fact that stocks are down from around $400 to $75.

While still rising below the all-time high, Roku is able to make a decent move off the low. When it comes to how far it has fallen, it is likely to rally quite a bit higher.

Yes, any agreement with Netflix might drastically affect the price.

In the first quarter, the $100 area was a prior support zone, and there has been so far in the second quarter. Roku stock is also approaching the 50-day and 10-week moving averages.

If Roku were to break out over this topic, the bulls might see a rapid rise, putting $140 in play. That''s roughly double the lows.

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Even at $140, the stock would remain down 71.7 percent from the all-time high. In that regard, one can see how we can get a massive increase in some of these growth stocks, particularly if we begin seeing short cuts and a return to technology.

If the stock rises above $140, the $175 level remains intact. That''s where we get the first major retracement level, which is the 23.6%, and the 200-week moving average.

If Netflix isn''t a stock-based transaction, then Netflix''s price action will be considered.

Trading Netflix Stock

Netflix''s stock is charted weekly.

TrendSpider.com has released a chart.

When Netflix reported significant earnings in April, a thread in the $330s closed the stock.

The shares slowed on the report, crashing through the covid-19 low at $290, then plunging through the double-bottom low between $230 and $250, which was made in 2018 and 2019.

Netflix''s stock is now striving to push back through the key $200 area, albeit a tiny hole.

If the strategy succeeds, there may be a jump to the $230 to $250 zone as well as the 10-week moving average. Above $250 and suddenly the $290 level and the downward 21-week moving average are in play.

Netflix''s daily chart

TrendSpider.com has included a chart.

When we turn to a daily chart, we can see how crucial this area is. A strong push from here might put a potentially strong rally in play.

It''s a good idea to return to the gap-fill level near $333 as long as the trend persists, and it''s possible that a few factors begin to favor the longs.

A caution: The NFLX and ROKU have been particularly difficult to deal with, but the pain has been much larger than two stocks. If the market falls once more, these names will have a difficult time rallying, with or without a deal.

Keep an eye on $200. A close below this level keeps Netflix''s 10-day and 21-day moving averages affecting. Both measures and $175 is in play, followed by a retest of the lowest at $163.

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