Netflix NFLX and the July Breakout through Resistance

Jul 1, 2014: 4:10 PM CST

Like the rest of the market, Netflix shares (NFLX) continued their uptrend with a shattering of resistance into new all-time highs for July.

Let’s start with the Daily Chart and note the breakout and updated levels to watch now:

Note the divergent (momentum oscillator) reversal up off the $300 per share level in late April – it’s a great educational example of the Momentum Divergence and Reversal concept.

After the breakout above the falling 50 EMA and then the prior price high of $380, Netflix (NFLX) shares continued trading through the “Open Air Pocket” straight up on a journey toward the all-time price high into the $460 per share level.

Also for educational purposes, pay special attention to the “straight up impulse” from $370 toward the $400 then $430 level – this is exactly what swing traders seek to capture on short-term impulses that develop from reversals into “open air” or breakout events.

I highlighted this likely breakout impulse in my prior update “Breakout Trade and Target Planning for Netflix NFLX.”

Later, I updated the successful Netflix breakout event as shares traded into – and then broke above – the $400 per share round number target level.

Note the “flag” or retracement that took place into the $435 level ahead of today’s impulsive – and partially short-squeeze fueled – rally.

Shares again trade through “Open Air” where short-sellers could help propel price even higher in the event price continues its breakout impulse through all-time highs.

Let’s step back and see the broader perspective from the Weekly Chart:

Shares retraced through the early part of 2014 in the context of a weekly pullback to the confluence support of the $300 per share “round number” area and the rising 50 week EMA (a great longer-term potential buy signal).

The result was a continuation – not reversal – of the 2013 uptrend in motion which culminated today with another fresh breakout to all-time highs.

Note the $475 reference level and potential for shares to extend the uptrend (and short-squeeze/breakout) toward the $500 ’round number’ target.

Otherwise, give shares “room to trade” above the $460 level, but act defensively in the real-time event of a breakdown – and bull trap – back under the $460 breakout (current support) level.

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Corey Rosenbloom, CMT
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