From our associates at Trader Minute
Netflix has been one of the strongest stocks in its sector and overall in the market, over the past year since last October. Recently, it had a great earnings report, even though subscriber growth in the US dropped from 980,000 to 880,000. The bulls are beginning to get a hold of Netflix and after a short drop last week, NFLX is setting some major move.
Over the last few months NFLX has undergone a consolidation weaving up and down and setting in a strong line of support at $96.92. Its overall trend has stayed well above its 200 day moving average and if you’re a bull you love to see this kind of price action.
This type of bottoming behavior has set up large moves in the past and this no different in what is being seen in Netflix.
One of the most important technical features on Netflix chart landscape has recently been the development of higher low that formed yesterday off of a bullish engulfing candle, and when stocks pull back and test the 50 day moving average, and then bounce. That is a sign the bulls are jumping in here especially, when the price also popped above its 50 day moving average and its 7 day moving average. There were nice volumes, which further helps the bulls case here.
When we see this kind of price action it creates a signal that we call our Vibe signal. Which simply means the price is beginning to trend again, and is above our 200,100, 50, and 7 day moving averages with some positive movement in the MACD and on good volumes.
With these triggers and current price action it simply points to a higher move in Netflix, and suggest the stock could be poised to revisit its high back in August and in the $120 – $125 range.
If you’re looking to trade this to the upside you need to remember to have a trading plan. To help, we see a good stopping point if NFLX reverses is right around $106.80.
To capitalize on the anticipated move here in Netflix, buying the Dec 110 calls at 8.40 offers a good mix of reward and acceptable risk.
The max reward if Netflix hits between $120 – $125 would be about 100% gain on the option.
If the stock doesn’t live up to its performance potential and drops to around $106.80, it would represent about a 30% loss on the option.
Strike Dec 110 Calls
Target Price 120-125
Stop Price 106.80
Jeff @ TraderMinute
TraderMinute was founded by Jeff Yaede with the purpose to help option traders manage risk and earn more through the 100K Challenge®. Jeff has successfully achieved taking $3K to $100K multiple times, in just 4 months or less, by using the TraderMinute proprietary signals (Vibe,TrendRider, and 3/7 Ignitor) for his trade entries & exits.
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