The easy money in Netflix, Inc. (NASDAQ:NFLX) stock has been made

The easy money in Netflix, Inc. (NASDAQ:NFLX) stock has been made

In November, I called Netflix (NASDAQ:NFLX) the best contrarian trade in tech. Falling markets had dragged Netflix stock down with them. That in turn gave NFLX a chance to bounce when investor confidence inevitably returned.

Indeed, as I wrote at the time, nothing really had changed in the Netflix business. Its Q3 results were solid, and the company still was dominating streaming. Investors simply were nervous about the big multiples assigned NFLX (and so many other stocks) and were heading to cash as a result.

It was a sell-off caused by external factors, not any real changes in the outlook for Netflix. And as investor confidence has returned in 2019, NFLX stock has soared. Netflix stock is up 31% from where I recommended it (a little early, admittedly), with a 50% bounce from the lows and 27% gains in 2019 alone.

And at this point, it might be time to take profits. I still think the long term story here is intact, but the easy money has been made. The cash flow worries around Netflix are overblown, but the company’s expensive investments in content aren’t without risk. Meanwhile, a market cap back near $150 billion prices in quite a bit of potential success.

In the near term, external factors might again hit NFLX stock. Another market-wide sell-off is going to take NFLX down. And even if tech stocks on the whole hold up, the narrative around NFLX is set to be very different over the next twelve months than it has been over the past few years. And that narrative seems likely to provide patient bulls a better entry point for Netflix stock.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 322.04.

The projected upper bound is: 386.70.

The projected lower bound is: 328.47.

The projected closing price is: 357.59.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 5 rising windows in the last 50 candles–this makes the current rising window even more bullish.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 83.4955. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 7 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 66.53. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 11 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 134.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 12 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 8 period(s) ago.

Rex Takasugi – TD Profile

NETFLIX INC closed up 4.470 at 355.810. Volume was 33% below average (neutral) and Bollinger Bands were 38% narrower than normal.

Open High Low Close Volume___
353.200 360.000 352.900 355.810 9,046,623

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 337.84 296.73 335.83
Volatility: 36 64 56
Volume: 9,778,146 13,017,399 11,672,467

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

NETFLIX INC gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
NETFLIX INC is currently 5.9% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of NFLX.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on NFLX.O and have had this outlook for the last 21 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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