Although on just average volume, shares of Netflix surged $8.58, almost 5 per cent, today closing at $187.88, above resistance of $184.90 according to TradersHuddle.com. The move may have to do with four brokers reiterating their target on the company. Piper Jaffray and Canaccord Genuity have an overweight and buy rating respectively with price targets above $215 while one reiterated a neutral and one initiated a sell rating.
But if you're a strong believer in technical analysis, like myself, today's large swing was an eventuality. I had been watching the stock for quite some time and noticed the shares developed a pennant-like formation (see link for more info) since its correction in December and was days from breaking up or down. Today's upward move looks like it could be a continuation pattern from the bullish rally seen in November but we will have to wait two more days to see how the shares trade.
The MACD also reversed (see below) and looks like it may turn positive if the shares rise again tomorrow, giving traders a second buy signal.
The company will be releasing its Q4 earnings on Monday January 24, 2011 which will include revenues from streaming its services into the Canadian market. A rally back to near $200 or above is not unreasonable as traders push the stock up in anticipation of another stellar quarter. Of course, expectations have been set high so selling prior to the earnings report AMC on the Monday could be a wise trade. Consider replacing your shares with a cheap weekly call or bullish spread if you still want to participate in the earnings on a less riskier scale.
Disclaimer: Neither I or any household members own shares or derivates of Netflix.
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