The stock is up nearly 125% since the beginning of the year, and it has been the definition of a "momo stock" for some time now, gaining more than 1,200% over the past three years.
Given that extraordinary track record, investors surely must be wondering whether Netflix shares can sustain a rally at such a pace.
There may be more near-term upside left this year for the stock, but that aforementioned long-term top looms.
Analysts at ElliottWaveTrader have had a very successful history with Netflix, correctly predicting the direction the stock would take following Netflix’s past four quarterly earnings reports.
This is partly because of the stock's tendency to cooperate very well with various methods of technical analysis, and what has worked in the past is likely to continue working going forward.
The company's most recent earnings report helped propel the price of shares to the lower end of the target region at $117.75, and price should now be in a corrective decline back to $90 to $100 over the next few months.
As long as the support region between $90 to $100 holds on the next pullback, Netflix is set up to make one final run this year up to roughly $130 to $140 before putting in a long-term top.
Assuming the price follows the path described and reaches the $130 to $140 target, it will complete a full impulsive Elliott Wave structure off both the 2014 and 2012 lows, strongly suggesting that a significant correction will follow.
This correction is likely to last at least a full year, eventually bringing the stock's price back down to approximately $40 before it finishes and the stock puts in a long-term bottom.
Click here for a chart illustrating the technical analysis on Netflix.
Overall, while subscriber growth for Netflix has been outstanding recently, other metrics such as rapidly shrinking cash flow and a price-to-earnings ratio of 283 are serious causes for concern.
In the end though, it is clear that sentiment has been the true driver behind the price of Netflix shares, which is why technical analysis has been so successful.
However, even technical analysis is starting to raise red flags, and the euphoria that has been rocket fuel for Netflix over the past three years is starting to dry up.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.