NFLX Stock: Resistance Has Fallen
This is an exciting moment for Netflix, Inc. (NASDAQ:NFLX) stock. It is on the verge of creating a new all-time high. The price that Netflix stock needs to pass is $133.27, a level that was attained in December 2015. The $130.00 price has been a sticking point for NFLX stock; there have been numerous attempts to break above this level, and none have succeeded, until now.
In my last report on Netflix stock, I outlined that everything was in alignment for NFLX stock to once again test the $130.00 level, and my track record with regards to Netflix stock speaks for itself. The fact that NFLX stock is now above that price is not a complete surprise, because resistance is not an impenetrable force. Every time the price approached this level, resistance grew weaker.
Now that NFLX stock is trading at $131.81 and is only inches away from an all-time high, I feel safe saying that resistance has finally fallen, and the door to much higher prices is now wide open.
The following Netflix stock chart illustrates the break above $130.00 resistance.
Chart courtesy of StockCharts.com
I was not always bullish on Netflix stock; for most of 2016 I was bearish, and for good reason, as the price of Netflix stock continued to trend lower. My views took a 180-degree turn in August 2016, when a large price pattern was finally resolved in a bullish manner. There were still a few roadblocks, but this pattern suggested that Netflix stock would once again test $130.00. This pattern is best illustrated in my report that was published in August.
One of the roadblocks that I was referring to was the 200-day moving average. The 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When the share price is above the moving average, it is bullish. When the share price is below the moving average, it is bearish.
As soon as the price broke above this moving average, I knew that bullish tailwinds were once again beginning to swirl around NFLX stock, and that a run toward $130.00 was in the making.
A golden cross was generated shortly after the price crossed the 200-day moving average, and this signal only served to confirm my bullish views. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). This bullish signal indicates that a bull market has begun. It is not uncommon for a share price to accelerate higher, just as Netflix stock did, after this signal is generated.
NFLX stock then proceeded to hit resistance at $130.00, and that level proved again to be a mighty foe, as the price was once again unable to penetrate this level. The sell-off that followed did no technical damage to the charts, so the bulls rounded up the troops to take another stab at $130.00. But this time, something different occurred. Netflix stock was finally able to break above $130.00.
Now that resistance has fallen, higher prices are now expected.
The following chart illustrates where I believe the next price objective for Netflix stock will be found.
Chart courtesy of StockCharts.com
The chart above illustrates the predominant long-term trend in Netflix stock. Two parallel lines define this bullish trend, and the pattern is referred to as an ascending channel. The ascending channel defines upper resistance and lower support. NFLX stock was oscillating between these two trend lines for over a decade.
Resistance is currently sitting north of $160.00 per share, and support is sitting just south of $25.00. The breakout above $130.00 insinuates that the upper level of resistance defined by the ascending channel would be the next logical price objective.
When I originally posted this chart, I explained my concerns with it. Each and every time one of these trend lines was hit, the trend reversed until the other trend line was hit. At some point in time, the lower level of support of this ascending channel will once again be tested, and that would equate to quite the devastating sell-off when it does happen. At this moment, I am focused on the upper level of resistance because the current path of least resistance is higher.
Bottom Line on Netflix Stock
I am bullish on Netflix stock and I have reiterated my view on a number of occasions. NFLX stock is now set to test resistance defined by the ascending channel, which currently sits north of $160.00 and is rising.