We’ve opened a bullish trade on Netflix (NFLX). NFLX disappointed investors a bit with a lack of domestic account growth in its latest earnings report.
However, we still like the consumer-discretionary space, and some recent good news is expected to send NFLX right back up. Piracy is the company’s biggest “competitor” and, while that’s less of an issue in the U.S., it is a major problem internationally. As so much of NFLX’s growth comes from international accounts, the rise and fall of piracy platforms can have a big impact on the stock’s overall performance.
Over this last week, one of NFLX’s biggest piracy competitors, Popcorn Time, was shut down over a dispute between the app’s developers. In some areas of Europe and Asia, Popcorn Time’s growth had been greater than NFLX, so the shutdown is a big deal. We like this position as NFLX bounces off of support and expect it to close its earnings gap to $110 in the short term.
‘Buy to open’ the NFLX November 103 Calls (NFLX151120C00103000) for a maximum price of $4.80.
We rarely use stop losses because option’s prices tend to be particularly volatile, so we’ll watch the underlying technicals of NFLX to tell us when to take profits if it seems the upside move has stalled, or when to cut losses if the stock appears to be heading lower.
You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.
A note that we have also closed the Gilead Sciences (GILD) and the Raytheon (RTN), and the iShares 20+ Year Treasury Bond ETF (TLT) trades.
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InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.
