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Traders Will Want to Cozy Up to Netflix Very Soon

Game-changing news combined with bullish technical outlook should vault stock higher


Netflix (NASDAQ:NFLX) — I’ve recommended this stock several times this year, making profits before its gap down in early April. The stock plunged from $130 to the low $50s late this summer due to management’s poor implementation of a new pricing strategy. But in early September, the stock began forming a saucer (rounding bottom), which is a long-term bullish formation. 

On Tuesday, Netflix executed a “game changer” on news that they would be the exclusive U.S. subscription TV service for first-run live-action and animated feature films from Walt Disney (NYSE:DIS). At the same time, Sony (NYSE: SNE) said that their PlayStation3 is the world’s most popular device for showing movies and TV shows from Netflix.

The break from the saucer provides a short-term trading opportunity to the top of the open gap made in early April at $90 to $101.79. I’d prefer to buy NFLX under $80 for that trade, but long-term investors may want to go for this hot issue now, at the market, for the potential offered by this combination of leaders in the world of household entertainment.

Trade of the Day -- Netflix (NASDAQ:NFLX)
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Trade of the Day Chart Key

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