Netflix is another company I’m accumulating stock in for a long term play. Until recently, NFLX was one of those stocks I always wanted to buy into but thought it was overpriced. I waited for a pull back that never came until… all the hoop la last fall.

Assuming subscribers and revenue can grow faster than content costs (not a sure assumption, see SIRI as a counter example), Netflix is going to make some good money and is worth more than 2x Revenue IMO. Buyout possibilities are the icing on the cake here.

Here’s the 6 month chart. You see some support around $105. (NFLX fell through that after writing this up, let’s see if that old support becomes resistance.) The next important level is around $90. I have a large (for my account) number of shares already bought during the big drop last year. However, if I get the funds, I would consider adding to my position at that level with the understanding that the stock could go lower.

If you are buying for a short term trade, watch that upper line of the channel above that’s around $120 right now.

Here’s the 3 year chart showing the sell of from last year. That down trend is over. The uptrend we’re in is not clearly defined yet.

Buying when the stock was in the $60-70 range was a good move for the short term here. (Hindsight, Duh!) I’ll be watching to see how NFLX responds to that support line I drew up there. With all of the PR mishaps of the last few years, and lots of oversees and content investments being made by the company, there are lots of short term risk in this stock. I would not be surprised if the stock plays with that $60 level again sometime this year. If so, I’m buying.

Be careful buying this stock. As for selling. For a short term play, that 200 day/week moving average above at around $150 would be a good short term target. Because the stock fell so fast, there isn’t a lot of resistance above that. The stock likely goes up to $200 to $300 again if and when things turn around for the company. So it might be good to let some ride if the stock does start moving up above $150 again.

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I have been pretty scared to touch Netflix even before their marketing flop just of my lack of confidence in the DVD rental sector altogether. I appreciate your technical analysis though. It appears now at around $107 there are those opportunities you suggest. However I would be worried about this as a long term play or even a buyout. I do think Netflix is a great asset as a name and with a great costumer base, even with what happen last fall. However I see too many threats from competitors who are in a better position to skip the DVD’s completely and just stream, like Google’s Youtube or Amazon’s Kindle amongst Apple’s iTunes.

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