Netflix NFLX Challenges New High with Elliott Count

Feb 16, 2009: 11:09 AM CST

Who saw this coming?!  Video/DVD by mail company Netflix (NFLX) is just over $2.00 away from challenging an all-time high at $40.90.  Let’s take a look at the Weekly and Daily charts to see just how this happened and overlay a possible Elliott Wave Count.

Netflix (NFLX) Weekly:

NFLX

Look beyond the strange numbers and letters if you don’t “speak Elliott,” as I’ll first start by discussing what’s here in the price data.

Price made an all-time high in early 2008 at $40.90, which is likely to serve again as some resistance, but the point is that if NFLX breaks above this high (which it might very well do so), odds are strength will beget strength and the stock could go higher (Adam Hewison of the Market Club set a target of $48.00 per share in his recent video on Netflix).

After forming the 2008 high, price scurried down (in corrective waves) down to the October 2008 lows of $18.00 per share before launching into a stratospheric and very bullish rally that has taken us into 2009.

Structurally, price is in an uptrend (higher swing highs and lows) and volume seems to be confirming the higher prices.  The momentum oscillator just registered a New Momentum High and actually appears to have just exceeded (slightly) its oscillator peak in 2008, which is quite bullish.  The weekly moving averages are officially (now) in the most bullish orientation possible.

In Elliott Speak, we’re perhaps in Wave 5 of an up-impulse, though as you’ll see from the Daily chart, we might have a little more ways to go in this 5th Wave.

Netflix (NFLX) Daily:

NFLX

The Daily Chart shows us just how powerful the advance from late 2008 has been.  Just like the weekly chart, price is in a confirmed uptrend and the moving averages are in the most bullish orientation possible.  Volume is rising (trend) which seems to be confirming the higher prices.

The momentum oscillator isn’t sharing in the rosy bullish picture, having diverged into early 2009 and recently tied the late 2008 momentum peak – I’d be more comfortable seeing new momentum highs accompany new price highs.

I’ve shown (with arrows) different points where price retraced back to the rising 20 day EMA which set-up low-risk buy opportunities.

Applying basic Elliott Wave, there’s a couple of ways to count the current structural waves, though each way leads to at least one (if not more) up-swings yet to come.

I’ve chosen this count to represent perhaps a portion of a larger fractal wave, and was careful not to label a “3rd Wave” as being the shortest (which seems tempting to do in a couple of counts).

If this count is correct, then I have us in Fractal 3 of final Wave (5), which means we have two more possible ‘pushes’ to the upside which could take us to Hewison’s $48 target (he bases his target on the recent support or ‘consolidation pattern’ sort of like an Inverse Head and Shoulders basing formation.

In fact, Hewison’s video is entitled “More Upside for Netflix?” and he writes, “This stock has been acting very well lately as it seems to be able to shrug off all the negative news that we have been bombarded with lately.”  He also goes a little into the news/fundamentals of the stock.

Continue to study this stock for additional insights.

Corey Rosenbloom
Afraid to Trade.com

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