Here’s Why Netflix, Inc. Is a Buy Into Weakness

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NFLX - Here’s Why Netflix, Inc. Is a Buy Into Weakness

Source: via Netflix

Netflix, Inc. (NASDAQ:NFLX), champion of the millennial’s entertainment habits, scored another victory this week — a robust earnings release. Wall Street celebrated the feat with a rapid 6% jump in its stock price. And that came on top of the 47% that was added to NFLX since last quarter’s earnings beat.

Thus far, Netflix stock has held firm to its post-earnings gains. And that has me thinking more upside could be in store. From a technical perspective, there’s nothing not to like about its price action. Here are three factors weighing in favor of NFLX bulls:

First, its trend is relentless and rising across all time frames. Like loyal puppies, the 200-day, 50-day, and 20-day moving averages are all following price on its northbound walk. These smoothing mechanisms should lend support during future price dips.

Second, the earnings-driven jubilee vaulted the stock to a new all-time high. There’s nothing like record readings to bring all the buyers to the yard. You can bet NFLX sits atop the watchlist of momentum traders across the land.

Third, Netflix is one of the first Nasdaq heavy hitters to reclaim all that was lost during last month’s market swoon. You better believe that makes it a favorite among any and all tech stock followers. Relative strength is their watchword and a favorite metric for discovering trade ideas.

While the stock may continue to meander as it digests the earnings gap gains, any and all weakness is likely a gift. Fortunately, NFLX options provide a way to pick up exposure at lower prices.

Create a Payday With Netflix Bull Puts

While selling puts (i.e., naked puts) offers the simplest way to get paid, it’s inefficient with a stock as expensive as NFLX. Instead, let’s use bull put spreads. If you’re comfortable betting NFLX remains above $300 for the next month or so, then sell the June $300/$290 put spread for $2.

The max gain is $2, and the max loss is $8. I suggest taking profits if you capture $1 of the potential $2 reward quickly. To minimize the damage if Netflix sours, consider exiting on a break of $300. That should reduce the loss to around $240.

As of this writing, Tyler Craig held bullish positions in NFLX. Want more education on how to trade? Check out his trading blog, Tales of a Technician.

For a free trial to the best trading community on the planet and Tyler’s current home, click here!


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/heres-netflix-nflx-buy-weakness/.

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