Netflix Stock: The Growth Story Isn’t Done Yet

Advertisement

Shares of online video streaming company Netflix, Inc. (NASDAQ:NFLX) enjoyed a steep rally after the company’s latest earnings report in January. And after a two-week consolidation phase, Netflix stock increasingly looks ripe to push higher again, with risk/reward well defined through a technical lens.

beat the bell stock investing adviceOn Jan. 22, one day after NFLX’s initial reaction to the fourth-quarter earnings report, I shared a post-earnings trade idea that focused on straightforward follow-through buying momentum if the stock could push past the intraday highs from Jan. 21.

Specifically, I wrote that “active traders could look to buy NFLX stock for a near-term trade at $415 or higher for a move into $448.” Three days later, Netflix stock reached this upside target, netting those that participated in the trade a nearly 8% profit.

Netflix Stock Charts

In the bigger picture, the post-earnings follow-through rally pushed NFLX back to the upper end of its roughly 16-month consolidation pattern. Looking at the below multiyear weekly chart, we see that after Netflix stock broke to fresh all-time highs in September 2013, it continued to rally into March 2014 but has since retested the September 2013 breakout point twice and the upper end of this longer-standing trading range four times.

In other words, NFLX stock is stuck in a well-defined wide trading range.

nflx stock charts weekly
Click to Enlarge

Much of Netflix’s growth story currently focuses on its success of continued international expansion into other continents, which is supported by both numbers and headlines. Also note that over the past couple of weeks, Netflix stock has been consolidating at the upper end of this bigger-picture trading range, which is a good precursor to an ultimate break to higher highs, although the timing around this is difficult to project from this angle.

On the daily chart, we see that all of this new upside momentum in NFLX stock came as a result of the positive reaction to the January earnings report and outlook. This just goes to show how powerful a post-earnings breakaway gap can be. Furthermore, because the timing of an eventual break out of the big-picture trading range on the weekly chart is difficult to forecast, taking “trades” one at a time on the closer-up time-frames helps clarify the bigger picture over time.

netflix stock charts daily nflx
Click to Enlarge

The next focus for Netflix stock is on a potential next up-leg out of this most recent two-week consolidation phase, which might I add is also shaping in the form of a constructive pennant. Active investors could look to buy NFLX on a break past the $457 area for a move into the $485 area for now. Any strong bearish reversal upon a break higher would be a sign to stop out of the trade until the stock can re-establish itself.

Like what you see? Sign up for our daily Beat the Bell e-letter and get investment advice delivered to your inbox every morning!

Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/netflix-stock-growth-story-isnt-done-yet/.

©2024 InvestorPlace Media, LLC