Full Stock Report - Netflix Inc. - A strong growth story!Due to Netflix’s huge expansion globally and the great quality of new products and features it provides subscribers with, leading to its great financial performance in the past few quarters, the share price of the company has been very bullish since the 3rd quarter of 2019. The stock was trading at only $253 in the end of September 2019 when the company beat analysts’ expectations for the 3rd quarter of last year and delivered better than expected earnings for the quarter, which immediately led to a huge buying interest among investors who started pushing the stock higher. The price started heading higher and formed a very strong bullish trend that lasted until the beginning of March 2020 where the stock reached its peak for the year at $392. Yet, due to the coronavirus pandemic and the huge sell-off across the stock market all around the world, Netflix’s stock depreciated as well, reaching the lows at $291 two weeks later.
Yet, as we have mentioned earlier, the social distancing and the fact that people have been staying at home have given investors a signal that the correction back then was a great buying opportunity, giving them a chance to boost their profitability to the upside, considering the great financial performance of the stock and the even stronger expectations for the 1st quarter earnings report. Thus, investors started buying aggressively and that led to a massive bullish rally in the past 1.5 months, sending the price from $291 to $450. In fact, this was a new all-time high, since the previous record was reached back in 2018 when the stock reached its peak at $420.
Since the company reached its new record high on the stock on the 20th of April we have seen a bit of profit-taking interest, which has ultimately sent the price down towards the key support at $394-$400 where investors started buying again earlier today, thus pushing it back up towards the current $419 level.
After analyzing all the above-mentioned factors and the huge financial success of the company, we believe in the longer-term success of the company and would like to add Netflix to our portfolio. Therefore, we need to decide at what price we would like to buy the stock in order to maximize our followers’ profitability to the upside. Moreover, we are taking into consideration that the situation with the coronavirus has started improving and countries are slowly getting out of the recent lockdown, which would also motivate investors to seek great buying opportunities on leading stocks, such as Netflix.
Going back to our previous point, the daily chart shows the key psychological support at $394-$400, which used to be a strong resistance level that was broken in the middle of April during the huge buying activity on the stock, where investors pushed it towards the new record of $450.
As soon as investors started cashing in some profits and the price reached the lows at $394-$400 there was a lack of further selling activity and that could easily be seen on the chart, which shows that as soon as the price reached the $400 support investors started buying again, taking advantage of the short-term profit-taking correction and sending the price towards the $419 already.
In fact, the middle Bollinger band line matches with the key support at $400, while the RSI is still heading higher at the current levels at 55. The Stochastics indicator has already crossed down in the overbought territory during the recent correction that has taken place and is now close to reaching the oversold area where it will be giving further bullish indications as well. Furthermore, the Fibonacci retracement at 38.20% matches perfectly with the support at $400, giving a further buying indication at that key psychological support level.
As you know, our correlation-confirmation model gives us a chance to identify great market movements and therefore be able to maximize our profitability on different stocks. Yet, before we buy the stock we need to get a confirmation from some of the biggest ETFs and make sure they confirm our bullish stance on the stock.
You can find our full correlation confirmation analysis if you follow us everywhere!
Therefore, the current price movement on both XLY and SPY confirm our bullish stance on the Netflix stock and give us a further indication that buying the stock at the strong psychological level at $395-$400 would give us a chance to make high profits to the upside. Therefore, considering that Netflix is currently standing at $419 we would prefer to wait for a short-term profit taking correction towards the support at $400 where we will start buying the stock aggressively. In case the price makes a further drop we will be interested in adding more to our buy positions at the next strong support mark currently standing at $380, which will give us a chance to improve our average cost basis and maximize our profitability to the upside.
We will be looking to cash in some of our profits when the price reaches our first target at $420, followed by the longer term target at $450-$460 where we will be fully cashing in our profits and waiting for another correction that would give us a chance to buy again and boost our followers’ profits again.
