Trading Netflix's Next Move
05/29/2014 7:00 am EST
Technician Corey Rosenbloom of AfraidToTrade.com updates a trading plan based on a popular tech stock’s most recent breakout.
Recently I highlighted the breakout and trade planning for Netflix (NFLX), and the price successfully traded up into its current target.
Let’s update our chart along with our trade planning to note a profit exit and potential new breakout trigger.
As I highlighted in the Netflix breakout and trade planning post, the clean break above the $360 level (50-day EMA) triggered an aggressive entry that instantly targeted the prior swing high and key price level into $380.
Shares achieved this in two sessions and then broke impulsively above $380 not only to confirm the breakout impulse, but also to allow for new entries into the breakout/bullish set-up.
Price now has achieved the “round number” and 61.8% Fibonacci overlap target at $400 per share and we’ll focus our attention on this level now.
Similarly, any further breakout pushes the stock into “open air” which sets up an eventual target play back toward $450.
Let’s study the intraday chart and potential pause or retracement scenario against $400 per share:
We can now see the full impulse and uptrend breakout above the $350/$360 level that set in motion the recent up-swing through $380 on high volume.
Price is trading down against the $400 level Tuesday as we note a clear negative momentum and volume divergence with price into resistance.
This is a basic “take profit” signal and potential sell-signal for aggressive/risk-seeking bears (placing a stop above the prior high).
At first, this can be a sell-signal but it can also be a “stand aside and wait for a new buy signal” to develop scenario.
Look for price to trade down against $400 toward $380 again, and if sellers overtake price under $380, look for a movement back to $370’s peak or as far as $350’s key reference level.
All of these potential support levels would be support/buy signals to trade a potential continuation of the uptrend.
Incorporate these levels—especially $400 and $380—into your trade management and planning strategies.
By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com