Chart Lessons From Netflix's Swing Move

Today we are going to examine why Netflix went up so much after correcting. What are the signs that the chart showed us before it went up? Let us take a look at the charts and learn some valuable lessons.

You can see that NFLX had a nice swing move up recently. One of the reasons why the stock rose is because it formed a bottoming tail pattern. This is a bullish reversal candlestick pattern that often hints of the end of a correction. The bottoming tail also formed at the rising 20 MA as well as price support. 

Besides that, a gap up can act as an area of support. That is why you can often see stock prices correct to gap areas and then reverse back up. Since the stock is in an uptrend and is trading above the rising 50 MA and 200 MA, therefore dips can be bought and you can look for swing trading setups.

When we look at the 60 min chart of NFLX, there were many signs that the stock's correction was ending. First of all, the stock corrected to the rising 60 min 200 MA and formed a 60 min bottoming tail there. Then it broke above a short term downtrend line. It gap up above the downtrend line and this is actually a very bullish pattern.

After that, the stock slowly drifted higher.

The chart above shows the 5 min chart of Netflix. I like to use the 5 min 50 MA as a buy/avoid zone. When it is in the red, we avoid buying the stock. You can see how the stock went back above into the white zone and this told us that the correction was ending.

Notice how NFLX stayed above in the white zone most of the time as it rose back up. This was a time to long the stock by finding continuation patterns.

The chart above shows the 15 min chart of NFLX.

It provided 2 ascending triangles and traders could have bought the stock for a swing trade. It also formed a 15 min box where traders can buy the breakout. At this moment, the stock is still in a 15 min uptrend and traders should continue to be bullish on the stock as long as it stays above the 15 min 50 MA.

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