Time To Bet On a Netflix Stock Rally

NFLX options are attractively priced, too

Managing Editor
Aug 17, 2018 at 11:18 AM
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The shares of Netflix, Inc. (NASDAQ:NFLX) are participating in the tech sector pullback today, down 2.3% to trade at $315.05. The FAANG stock is on track for its sixth straight daily loss, but is now trading near a trendline with historically bullish implications -- suggesting the stock's dip could present an opportunity to buy short-term calls on NFLX.

Specifically, Netflix's recent slide has brought it within one standard deviation of its 160-day moving average. Over the past three years, there have been three other instances of the equity pulling back to this trendline after a lengthy stint above it. Following those last three signals, NFLX was up 12.58% on average five days later, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Another move of this magnitude to the upside would have Netflix stock erasing the deficit it incurred amidst its current losing streak. 

Daily Stock Chart NFLX

Despite Netflix's recent slide, the equity has still gained 64% in 2018, and 89% in the past 12 months. From a technical standpoint, the security may be due to bounce, since its 14-day Relative Strength Index (RSI) is now all the way down at 25.8 -- deep into oversold territory.

Those looking to bet on NFLX may want to consider buying calls. Schaeffer's Volatility Index (SVI) for the security is currently at 32%, which registers in the 14th percentile of its annual range -- indicating short-term options are attractively priced at the moment, from a volatility perspective.

What's more, Netflix has consistently rewarded premium buyers over the past year. This is per the stock's Schaeffer's Volatility Scorecard (SVS), which is currently docked at a healthy 95 out of 100. This suggests that NFLX stock has regularly made larger-than-expected moves on the charts, compared to what its options were pricing in.


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