Why Netflix Is the Best-Performing FAANG Stock in 2020

Netflix is up more than 15% so far this year and now sits near a big-time breakout level. Let's look at the charts for the stock.
Publish date:

Netflix  (NFLX) - Get Report hasn’t been able to completely sidestep the coronavirus selloff, falling less than 5% from its 2020 high, but it's held up pretty darn well.

Investors should be content with that performance, considering that the S&P 500 and Nasdaq are still down 22.4% and 20.1% from the 2020 highs, respectively. A deeper dive into Netflix's numbers should make them even happier.

Netflix stock is actually up year-to-date, rallying an impressive 15.8%. It’s next closest FAANG peer is Amazon.com  (AMZN) - Get Report, which is up 6.5%. After that though the rest of the group - Facebook  (FB) - Get Report, Apple  (AAPL) - Get Report and Alphabet  (GOOGL) - Get Report - is down double-digit percentages for the year.

With the public at home under shelter-in-place and quarantine orders, it's obvious people are using the internet. Engagement numbers are up across social media platforms and streaming is climbing with it. Netflix has even had to throttle streaming quality in parts of Europe so it doesn’t put too much strain on the internet.

With streaming in high demand, investors are putting the money to work in one of the streaming kings. But can the momentum in Netflix last?

Amazon, Apple, Facebook and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN, AAPL, FB or GOOGL? Learn more now.

Trading Netflix Stock

Weekly chart of Netflix stock.

Weekly chart of Netflix stock.

At its recent low, Netflix stock was down 26.1% from the highs. That’s almost 1,000 basis points ahead of the S&P 500, an outperformance than not many would have suspected amid such an aggressive bear market.

A look at the three-year weekly chart above highlights just how impressive Netflix’s recent price action has been. The stock bounced off its 150-week moving average a few weeks ago, just as it did in the third and fourth quarter of 2019.

However, Netflix stock is now approaching multi-year range resistance. The $380 to $385 zone has kept a lid on this stock for several years. Only briefly was Netflix able to push through this zone, a move that occurred almost two years ago in mid-2018.

It’s hard to believe that Netflix stock could actually breakout over long-term resistance at a time like this. However, this stock is showing plenty of relative strength right now, and bulls only have so many stocks to seek cover in.

If NFLX shares can breakout over this mark, it puts $400 on the table. Above that and $420 is possible. If resistance holds, what downside levels does the stock need to hold? 

Ideally, Netflix will be able to stay above the $340 mark, as well as the 50-week moving average just below that. If it gives way - say under increasing market-wide selling pressure - then investors must see the 150-week moving average hold as support.

It would also be encouraging if Netflix could avoid making a lower low, as it has been making higher lows for several years now (blue arrows). Below the 2020 low technically puts the 2019 low in play near $260. 

For now though, let's see how it handles $380 to $385 on the upside and $340 on the downside.