Chart of the Week – NFLX 

Within the Chart Trades report, we’ve started to do write ups for key stocks before and/or after earnings for key stocks.  Here’s the note from Friday’s piece that highlighted NFLX.  Upgrade to a premium membership to receiving Chart Trades, which hit your inbox early in the morning twice a week.  

We last recommended NFLX on 9/17, as it was close to completing the inverse H&S pattern. While the stock got through the noted breakout point, real upside follow through has been lacking the last few weeks. The early reaction to last night’s earnings has the stock trading near all-time highs. Thus, the upside target of 810 still is in play. 

Going forward, we’ll need to watch how the stock does vis-à-vis the apparent opening upside gap.  It’s had noticeable gaps post earnings in three of the last four quarters – Two up and one down.  NFLX respected the upside gaps from last October and January, with the stock trending higher over the ensuing three months.   

Conversely, it filled the downside April gap within a few weeks and rallied through mid-July. Thus, the next two weeks of action will prove important once again, with NFLX trying to hold above and, potentially, extend from today’s gap.

Bigger picture, the question that will need to be answered for NFLX and hundreds of stocks over the next few weeks is this:

How will the market view the current technical state?  

1-Too extended from its August low to reward a solid earnings report.  

Or…

2-Net flat since the last earning cycle, with a budding bullish pattern breakout ready to be leveraged.