Support, A Breakout, and Missing Out in Netflix NFLX

Jan 23, 2015: 12:11 PM CST

If you didn’t catch Netflix (NFLX) off the critical support level, and now the breakout event, have you missed the boat on profiting from this rally?

Let’s take a look at the chart, key levels, and yes the upside targets to play for from here.

We’ll start with the Daily Chart:

Price gapped lower in October, pushing back from the $330 level to the underside of the falling 20 day EMA into $400.

Then, price pushed to a new low, creating a Double Bottom with Positive Divergence pattern off the $320 per share level.

Keep this level in mind – it was a critical Weekly Chart Support Floor (that built the foundation for the rally).

Volume surged with price on the two days prior to the big earnings breakout gap through the $350 resistance level.

After market close on January 20th, traders reacted favorably to Netflix’s earnings, instantly surging price higher above the 200 day SMA and $400 level.

Have you missed the boat on this trade?

For most traders, probably as we tend to prefer buying on retracements or into support.

Most traders don’t feel comfortable buying an outright breakout.  It’s riskier and more difficult to place stops.

However, the “breakout buy” strategy can work and yes, Netflix can continue trading even higher.

Right now, focus on the current price pivot into $440.

Netflix would trigger another breakout buy through “Open Air” above $440 to target the $470 level.

In the future, a movement above $470 opens shares to trade through another bullish pathway to new highs.

Here’s the reference chart on the Weekly Frame:

I simply wanted to highlight the importance of higher timeframe reference (support) levels which is the case here into $330 per share.

Note the examples where price traded into this level and buyers collectively bought shares at this key pivot.

Yes, the earnings surge sent price flying toward the highs, through the $375 cluster, and now we’re focusing on the probabilities of price continuing through $440 and $450 toward the $480 level or even higher than that.

It’s fine to miss out on opportunities – don’t feel horrible about them – but learn lessons so you can recognize and react without emotion to similar situations in the future.

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Corey Rosenbloom, CMT
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