On Tuesday night's Mad Money program from the West Coast Jim Cramer talked about the FAANG members. The only member of FAANG that gave Cramer pause last night was Netflix, Inc. (NFLX) . Not because the company isn't hitting it out of the park, but rather because the shares have already rallied 19% for the year and are now priced for perfection.
Let's check out the charts and indicators to see if there is more room on the upside?
In the daily bar chart of NFLX, below, we can see the price action of the last year. NFLX rallied from last January to a small double top pattern in June/July around $420. Prices corrected lower for six months to the $240 area and popped to the upside in recent days.
NFLX showed a number of bearish signals the past months but now some bullish clues have appeared. NFLX recently closed above the now flat 50-day moving average line. The slope of the 50-day line was negative from early August to now. NFLX closed below the cresting 200-day line in October and has now rallied back towards the underside of the now negatively sloped 200-day average.
The daily On-Balance-Volume (OBV) line shows a negative trend from June but recent strength in the line has broken that trend. The Moving Average Convergence Divergence (MACD) oscillator gave cover shorts buy signals in November and December and it is now crossing the zero line for an outright go long buy signal.
In the weekly bar chart of NFLX, below, we can see a very impressive, almost parabolic, rise the past three years from below $100 to over $400. Prices are now below the flat to bottoming 40-week moving average line.
The weekly OBV line shows a 2-1/2-year rise and a six-month decline. The six-month decline looks to be over and fresh strength in the OBV line would tell us that aggressive buyers have returned. The weekly MACD oscillator has narrowed and is close to a cover shorts buy signal on this longer time frame.
In this Point and Figure chart of NFLX, below, we can see a long decline and also an upside breakout. A $439 price target is being projected.
Bottom-line strategy: NFLX has run up sharply in recent days so a pullback or a sideways consolidation is probably likely. A review of the charts (above) suggests that NFLX could surprise us on the upside in the next few months. Aggressive traders could try to go long on a dip below $300 if they can afford to risk below $280 where the 50-day average line intersects. Gains to $360 and maybe even new highs of $440 are possible according to the Point and Figure chart.