NFLX Stock: Defying Gravity
Netflix, Inc. (NASDAQ:NFLX) reported earnings after the close of trading on January 18, and to everyone’s delight, it beat on both the top and bottom lines. Investors cheered this great news and sent NFLX stock surging higher by 8.13% to $144.10 in after-hours trade, creating a new all-time high in the process..
If you have been following any of my publications with regards to Netflix stock, this feat would come as no surprise because higher prices were to be expected. These expectations are based on the signals and price patterns that were pulled straight from the Netflix stock chart.
I have been using technical analysis for almost two decades as the basis of my investment views and trading strategies. The Netflix stock chart first suggested that a bullish view was warranted in early October, and the price action remained constructive, indicating that higher prices were likely.
The following Netflix stock chart illustrates the developments that supported this bullish view.
Chart courtesy of StockCharts.com
In early October, Netflix stock generated a golden cross. A golden cross is a bullish signal that is produced when the faster 50-day moving average crosses above the slower 200-day moving average. This signal confirmed that a new bull market had begun, as well as confirming a bullish pattern that suggested $130.00 as an appropriate price objective.
After a golden cross is generated, it is not uncommon for price to accelerate in the direction suggested by the indicator. This is exactly what happened with Netflix stock as the price quickly surged just shy of $130.00.
$130.00 proved to be a sticking point, and for good reason. This level marked the all-time high that was created in August 2015, and prevented Netflix stock from advancing beyond it on two further occasions.
On January 5, I published a report titled “Netflix, Inc.: This Chart Is Why NFLX Stock Is Taking Off.” This report highlighted the breakout above $130.00 and the bullish implications that were set to follow as a result.
The current earnings report has sent NFLX stock surging in after-hours to $144.10, and this price point alleviates any anxiety I had that NFLX stock would fall back below $130.00. This opens up the door to much higher prices, and the following Netflix stock chart illustrates where the next level of resistance can be found.
Chart courtesy of StockCharts.com
An ascending channel has defined Netflix stock’s bullish run towards higher prices. This trend began soon after NFLX stock started trading on the open market. An ascending channel is created using two parallel upwards-sloping trend lines. One trend line represents support, and the other trend line represents resistance.
NFLX stock has been contained within this channel since inception, and every time resistance or support has been hit, it served to reverse the trend until the next level of support or resistance was met. This pattern was set to continue but this current run in Netflix stock has changed that. Resistance was hit in early 2015, and under this notion, it suggested that perhaps support outlined by the channel would be the next likely objective. This level currently sits below $30.00, and a drop to such depths would constitute a total disaster.
The good new is that the bearish outcome is unlikely to happen at this juncture because the price action as noted above suggests that much higher prices are likely. This opens the door up for another test of the resistance level outlined by the ascending channel. It is difficult to say where this level lies due to the scaling, but I can say with ease that resistance currently sits north of $170.00, and as time progresses, this target continues to climb.
Bottom Line on NFLX Stock
Netflix stock reporting earnings that beat both on the top and bottom lines, and as a result, investors sent NFLX stock soaring. This leaves no doubts that the breakout above $130.00 is legitimate, and much higher prices can now be expected.