2 Ways to Tune In to the Netflix (NFLX) Breakout

The $209 level has a good likelihood of acting as a magnet

   

nfllx multi year 300x227 2 Ways to Tune In to the Netflix (NFLX) Breakout
Click to Enlarge
Movie subscription service provider Netflix (NASDAQ:NFLX) has seen some major volatility in its stock over the past two years.  After falling from the July 2011 all-time high near $305, the stock didn’t find bottom until August 2012 and closer to the $52 mark.  The stock has since rebounded sharply, the pivot point having been a big post earnings up-gap in mid January of this year.

On the multi-year chart at right, note that the stock has now retraced more than half way (50%) of the big down-leg in 2011.  The next point of resistance is what I often refer to as a ‘confluence zone’ where multiple indicators come together at one level.  At just about $209 Netflix  runs into its 61.80% Fibonacci retracement level, which happens to coincide with the top of a down-gap dating back to September 15 2011.  In other words, the filling of this long-standing gap not only satisfies gap-traders’ price target, but from a trend point of view the stock also reaches a pivotal point near $209.

nflx daily 292x300 2 Ways to Tune In to the Netflix (NFLX) Breakout
Click to Enlarge
On the closer-up daily chart below note that the stock has consolidated nicely through the month of February, until it yesterday broke out of a bullish pennant formation on respectable volume.  The stock is extended above its simple moving averages but as stated above, the $209 level has a good likelihood of acting as a magnet of sorts and thus a great profit target for those long the stock on the back of yesterday’s breakout.  The $209 level is about 8.50% higher from yesterday’s close at $192.36.  Any drop below $180 would prove the breakout false.  For those interested in an options play, the trade can also be done using at-the-money calls given current low implied volatility levels.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.


Article printed from InvestorPlace Media, http://investorplace.com/247trader/2-ways-to-tune-in-to-the-netflix-nflx-breakout/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.