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Why Netflix’s best days could be behind it

More pain for Netflix?

Netflix is off to a rough start this year, down 23 percent, and traders are betting it's about to get a lot worse.

Options volume this week has grown increasingly bearish, indicating the negative sentiment on Wall Street.

"What I see is a really bad technical setup. It really needs to hold $80 here. There really is no valuation support." Dan Nathan told CNBC's "Fast Money" on Thursday.

By Nathan's chart work, recent performance depicts a head-and-shoulders continuation pattern — a bullish-to-bearish reversal — which Nathan said implies a move lower. In a longer term chart, Dan pointed out two key levels to watch: $80 and $85, the former being where the stock traded during the February low.

Key factors driving the bearish sentiment are increasing competition and subscriber growth concerns.

"If they miss on the sub numbers again when they report in July. I think this thing is going much lower," said Nathan, founder of RiskReversal.com.

Netflix posted first-quarter earnings per share of 6 cents and revenue came in $1.96 billion. Analysts expected the company to report Q1 earnings of about 3 cents per share on $1.97 billion in revenue. Despite the earnings beat, shares fell sharply on weak subscriber guidance.

Shares were in the red on Friday and the stock is down 35 percent from its all-time high.