Watch These Netflix Price Levels After Q3 Earnings Drive Stock Higher

Netflix (NFLX) shares jumped 5% in extended trading on Thursday after the streaming giant topped Wall Street’s third-quarter estimates and issued a strong revenue outlook.

During the quarter, Netflix added 5.1 million subscribers, surpassing expectations of 5 million, though the company has shifted its focus to revenue and profit margins as its business model matures. The company said it’s targeting an operating profit margin of 28% next year compared to its 27% goal this year, adding that its sees ample room to increase its margins over the long term.

Netflix shares have gained more than 41% this year prior to Thursday’s after-hours pop as investors cheer the company’s ongoing efforts to expand its advertising business and offer more live streaming events.

Below, we’ll break down the technicals on the Netflix chart and identify key price levels that investors will likely be watching out for.

Rising Wedge Pattern in Play

Netflix shares have traded within a rising wedge since late June, with the price recently retracing to the pattern’s lower trendline and 50-day moving average (MA).

Importantly, the stock on Thursday also registered its largest day of volume since mid-July, indicating portfolio repositioning ahead of the streaming giant’s quarterly results.

Given the stock’s expected earnings-driven jump, let’s look at several key overhead price levels that may come into focus and also point out two key support areas where the shares may attract buying interest during pullbacks.

Overhead Price Levels to Watch

Firstly, investors should eye the $735 level, an area on the chart where the shares could run into selling pressure near the rising wedge pattern’s upper trendline. This trendline has provided resistance on two separate occasions since late September.

To project a price target above the stock’s all-time high (ATH), we can use the measuring principle. This chart technique works by calculating the distance of the rising wedge near its widest point and adding that amount to the pattern’s top trendline. For instance, we add $125 to $735, which projects an upside target of $860.

Key Support Areas to Monitor

If a post-earnings rally fades, investors should initially monitor the $688 level. The stock could attract support in this area near the symmetrical triangle’s lower trendline, which also corresponds with a range of similar trading levels within the pattern.

A decisive breakdown below the wedge’s lower trendline opens the door for a decline to around $635, a level on the chart where investors may seek entry points near consolidation periods on the chart in April, May, and June, with the closely watched 200-day MA also positioned nearby.

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