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NEW YORK (TheStreet) -- Three weeks ago, Netflix (NFLX) - Get Netflix, Inc. Report shares were up 177% on the year, hitting a 52-week high of $129.29 on Aug. 5. Over the course of the past three days and change, 50% of that gain has been wiped out. The stock closed at $96.88 on Monday.

Yesterday's highly volatile price action, which followed sharp declines in the two previous sessions, was the leg down that saw the stock touch the 50% retracement level of the 2015 range. The equally volatile intraday bounce took it back up to the 38% retracement level.

Netflix's weekly chart shows the stock trading in a horizontal channel for most of 2014 into the first quarter of 2015, when a strong earnings report that April powered a breakout above pattern resistance and the rally up to the recent highs.

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Netflix's daily chart details the drop back down to the key retracement levels, which included a move through a rising trend line drawn off the April and June lows, reinforced by the rising 50 day moving average.

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Monday's volatility saw a spike in volume that was 200% greater than the 50 day moving average of volume, and took the relative strength index and stochastics into oversold conditions.

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It is often difficult to find a technical backdrop during periods of extremely high volatility, but in the case of the Netflix chart, the Fibonacci retracement levels provide some context. The real body or opening and closing range of the stock is contained within the 38% and 50% retracement levels, and it is those levels that will define the parameters around which to trade. 

Long positions could be initiated after a strong close above the 38% retracement level or an aggressive short after a close below the 50% retracement level. In either case, use a position size that accommodates your tolerance for volatility.

For another take on Netflix, TheStreet's Jim Cramer recently recommended owning the stock for the long term

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.