Trading Setup for NFLX – 1-2-23

What should you do with NFLX in this new year of 2023?

Let’s take a look at a weekly chart:

NFLX hit 700.99 in November of 2021 and just 5 months later hit a low of 162.71 in May 2022. It found support at this level several times between May and July before beginning a move higher, which makes me believe that the smart money finds this level to be a good area to accumulate stock. NFLX then rose to a high of 330 in December 2022 and then touched 275 before bouncing back to around 296. It’s currently in a clearly defined rising flag pattern, the top of which coincides with the 340-350 area and the bottom at 275-283. This type of pattern is traditionally considered bearish.

To get a more detailed picture, let’s zoom in on the daily chart:

We can see the same flag pattern a bit closer up. The price level just before the large gap down on heavy volume, back in April 2022, was 330, which was where the stock rejected on Dec 13, 2022. There is resistance in the 300 -302 area and support (89ema and flag bottom) at the 274 level.

Possible Moves

If NFLX can break through 302 resistance with volume, it could run to the 330 area. Then it would need another thrust to get through the 330 resistance to the top of the flag at 350.

If NFLX rejects and moves lower, it would need to break through support with volume at 274.

What should you do?

It’s hard to take a position here because relative volume has been low, which makes it difficult to determine whether the smart money is continuing to accumulate in expectation of a move higher, or whether they are selling into this move up and getting ready to reload at much cheaper prices. Don’t forget, there’s a long way to go from here to the 162 lows.

If the bear market continues and the market takes a turn lower, then NFLX will most likely join in the drop. All we can do right now is wait and see what the volume and price action tells us before taking a position in NFLX.

Best case scenario the rising rate recessionary environment we are in would be 50 points up, which is not too shabby if you can catch the move. The downside risk could be 150 points or more.

If you are a fundamental investor looking for a long term entry, I can’t think of a good reason not to wait. Even if you miss the 50 points, if you truly believe NFLX is a good value, it will still have a lot of room to move higher. But the risk of getting in too early seems a bit to high. and unnecessary.