Amid an otherwise lackluster trading session, Netflix, Inc. (NASDAQ:NFLX) shares scored a rousing breakout yesterday. And that places the momentum darling within striking distance of its all-time high notched in mid-July.
At $179.25, NFLX stock sits a mere 9% away from its record peak. And while 9% may sound like a fair distance, for a stock as volatile as Netflix, it’s far from a challenging feat.
To set the stage for Wednesday’s pop, let’s first consider the weekly time frame. Simply said, she’s a beaut. All moving averages are ascending in bullish fashion. Any and all weekly retreats over the past year were halted by the rising 20-period moving average, which is the hallmark of strong uptrends.
Buyers are simply unwilling to allow Netflix to fall very much before swooping in and gobbling up shares. The latest pullback was textbook ending with a small bodied doji candle right before the reversal higher.
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On the volume front, we haven’t seen any distribution bars since mid-June. While sellers have taken control from time to time, their hearts really haven’t been in it. And that’s yet another feather in the bulls’ cap.
Finally, the RSI indicator has been well entrenched in bullish territory above the 50 level ever since last August, so as far as momentum is concerned it’s game on for Netflix bulls.
The composition of the stock’s rally over the past six trading sessions has been about as good as it gets. The up days have been large and accompanied by heavy volume.
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And the slight consolidation that preceded yesterday’s surge resulted in little give back in the stock. If the Nasdaq can continue leading the market higher look for Netflix to eventually revisit its prior peak.
Double Your Cash with NFLX Call Spreads
Buy the NFLX Oct $180/$190 bull call spread for $4.15 or better. This $10-wide vertical spread carries $4.15 of risk and $5.85 of reward. The max risk arises at expiration if the stock sits below $180. The max reward, however, is all yours if the stock can rise above $190 by then.
Also, Netflix is slated to report earnings on Oct. 17 so I suggest exiting the trade before then if you’re unwilling to risk a down-gap after earnings.
As of this writing, Tyler Craig didn’t hold any positions in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
