Netflix is hovering near highs after an unstoppable rally this year. A 90 percent run-up has put it at stratospheric heights, says one strategist, but the technicals suggest the sky’s the limit for the tech sector high-flyer.
“It’s getting a big premium to its 200-week moving average, 175 percent premium to that moving average, that’s getting a little extended. However, the thing is the one time it did get higher than that it got to a 200 percent premium which would give it another 10 percent upside from here,” said Maley. That would put the stock at roughly $400 per share and give it a market cap north of $173 billion.
Even when it has retreated, it has managed to hold onto key critical levels, said Maley.
“It’s pulled back a couple of times. Each time it held its 50-day moving average so that’s rock-solid support,” he said. “Then, following that, the most recent rally has not only taken it to a new high but a meaningfully new high. That’s the kind of momentum that the people, the technicians really like to see.”
Netflix briefly broke below its 50-day moving average during a pullback in late March and early April and again later that month. It quickly recovered above the support line. It would need to decline by 11 percent to touch that level again.
Susquehanna’s Stacey Gilbert said sentiment looks bullish for Netflix on the options market. Still, its recent run-up makes it somewhat expensive. Typically, when a stock rallies, the cost of the option as a percent of its spot decreases, explained Gilbert.
“That hasn’t happened here in Netflix,” Gilbert, market strategist at Susquehanna, said on Tuesday’s “Trading Nation.” “That does make the options fairly expensive relative to where they’ve been historically. For that reason … we do continue to like using options.”
Its 90 percent advance this year makes Netflix the second best performer in the S&P 500. It has increased 121 percent over the past 12 months.