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Has Netflix (NFLX) Found A Bottom?
Despite a recent correction, market sentiment towards Netflix stock remains positive while certain analysts see a notable upside from current levels. Take a look at this recent article posted on Investopedia that states a 30% rally could be in the cards for NFLX and the following article posted on Seeking Alpha that builds a strong case for remaining bullish.
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Technicals
There are several technical developments over the last month or so that suggest Netflix has turned bullish once again. The stock price is seen climbing above horizontal resistance at $356 and holding above the 20-day moving average. Aside from that, a recent convergence with the S&P 500 might be sending the strongest signal of all. Note that NFLX diverged from the index for about a month starting from mid-July to correct lower. Since around the middle of August, the stock price has once regained its correlation with the popular index, which is often a tell that an important bottom might be in place. The S&P 500 is added to the chart below and denoted in bars to illustrate the divergence and subsequent convergence.
*source Tradingview.com
If you agree there's further upside ahead for NFLX, consider this trade which is a bet that the stock will continue to advance over the next four weeks, at least a little bit.
Buy To Open NFLX 12OCT18 362.5 Puts (NFLX181012P362.5)
Sell To Open NFLX 12OCT18 365 Puts (NFLX181012P365) for a credit of $1.18 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when NFLX was trading near $365. Unless the stock rallies quickly from here, you should be able to get close to this amount.
Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers). Each contract would then yield $115.50 and your broker would charge a $250 maintenance fee, making your investment $134.50 ($250 – $115.50). If NFLX closes at any price above $365 on October 12, both options would expire worthless, and your return on the spread would be 86% (1256% annualized).
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Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry
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Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts. seth@terrystips.com
You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Seth@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you for our Premium Service package ($119.95 value plus an extra 4 months of our Premium Service, valued at another $190.80). You get $300.65 worth of services without paying us one penny.
I look forward to having you on board, and to prospering with you.
Terry
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