Streaming giant Netflix (NFLX) has built a 3.5% lead this week alone, thanks to price-target hikes from UBS to $1,450 on Wednesday, and from Jefferies to $1,400 on Tuesday. Out of the gate on Thursday, the shares hit a record high of $1,262.81, bringing its year-to-date tally up to 40%. If you missed the train on this frenetic rally, never fear, because the stock is flashing a historically bullish signal on the charts.
NFLX’s new high comes amid historically low implied volatility (IV) — a combination that has been bullish for the stock in the past. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, there have been seven other instances in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer’s Volatility Index (SVI) sat in the 20th annual percentile or lower — as is the case with the equity’s current SVI of 25%, in the 4th percentile of its 12-month range.
The data shows that one month after those seven previous signals, Netflix stock was up 7.1%, on average and finished the month higher 86% of the time. From its current perch at $1,248.37, another move of that magnitude would put the equity above $1,300. Per the chart below, this would take NFLX past an ascending trendline starting from its December highs. Also note the double bottom pattern that could signal this rally has legs, and the upward-sloping 20-day moving average containing short-term pullbacks.
Even with the bull notes this week, Netflix’s consensus 12-month price target of $1,167.35 is a 6.5% discount to its current perch. If analysts continue to adjust to Netflix’s chart dominance, those price-target hikes will keep the wind at the security’s back.
Short-term options traders are heavily put-skewed right now. NFLX’s Schaeffer’s put/call open interest ratio (SOIR) comes in at 1.50, and sits in the 100th percentile of its annual range, showing such a preference for short-term puts is rare in the last 12 months. An unwinding of these bearish bets in the options pits is one final contrarian angle that could keep the momentum going.