However, the move comes after a strong, 3.8% rally on Monday, which stood out to me for several reasons.
First, while the Nasdaq gained 0.5% on Monday, it closed near its lows, giving up most of the post-open gains. That was a bad look for the index, but Netflix closed near its highs.
It also came on a day when the S&P 500 rallied as much 0.93%, but closed lower by almost 0.5% - an ugly reversal following a strong open.
Netflix’s rally also stood out to me as the shares rotated over last week’s high. Given that Netflix has been ranked one the best stocks of 2020, traders are looking for some follow-through action.
Over the last five days, only Apple (AAPL) - Get Apple Inc. Report is outperforming Netflix as the top FAANG stock, and that’s largely due to its potential breakout rally on Tuesday, which has it up 4%.
Monday’s action is quite clear on the chart, with Netflix powering up through $521.50.
However, Tuesday’s dip undid the weekly-up rotation. That doesn’t mean this is a bearish setup now, it only means that the stock has lost that rotation component for the time being.
Further, $520.45 is the November high. So not only is Netflix contending with a weekly-up rotation, it’s also working on a monthly-up rotation.
What bulls want to see now is a move up through Monday’s resistance at $524 and Tuesday’s high at $524.70. Above this area and Netflix has some blue sky above it.
We’d have to see how shares handle $530.76, which is the 61.8% retracement from the September low to the all-time high in July.
However, most bulls will have their eyes on $550. Not only is this a nice round number to target, but Netflix stock has struggled with advances above this mark all year. It’s also where the 78.6% retracement comes into play.
Above that and the October high will be on the table near $572.50, which comes up just a hair short of the all-time high at $575.37.
In short, I am looking for a move over $525, quickly putting $530 in play, followed by a possible move to the $548 to $550 area.
On the downside, we have a number key moving averages and support marks (including this week’s low) all near $500. A close below $500 and short-term bulls may throw in the towel.
Below last week’s low at $491.29 and they should certainly consider it.