by Raghu Gullapalli, contributing writer
This morning news came out courtesy of All Things Digital that Netflix (NFLX) the provider of on demand internet streaming video and flat rate DVD-by-mail. was expanding its operations into Latin America.
Upon the break of this news the stock gapped up in the pre market and looks ready to launch its booster rockets once again in attempt to break the $300 barrier.
This is a prototypical example of a long gap trade.
- Netflix gaps above a long-term resistance level, in this case the all time highs of $277.70.
- The premarket volume in the stock exceeded 500,000 shares, ensuring liquidity.
- The stock gapped up more than 3%
- Netflix gapped on a strong catalyst that did not involve earnings, i.e., the news of its impending expansion into the Mexican, Caribbean and South American markets.
This expansion into these markets south of the U.S. borders, gives credence to Netflix’s (NFLX) foreign expansion plans and lends credibility to the company’s overall strategy. If you will recall, just last fall the company expanded into the Canadian market and in just a few quarters of operations it has is emerged as the market leader.
With the equity markets reacting well to the news of the Greek bailout and the strong surge over the past week, I have little doubt that the tailwinds from the market could be enough to push the stock into the hallowed $300 territory. An area occupied by precious few technology companies.
If all that wasn’t enough, how about a cherry on top? In the form of an “F” for Facebook the social media behemoth, that has been considering a joint venture with Netflix. Facebook recently added Reed Hastings, the CEO of Netflix to its board of directors.
But a word to the wise, in this dynamic market landscape, today’s darling could well become tomorrow’s dud, as is well represented by the misfortunes of Research in Motion (RIMM). And market sentiment could change very quickly and could become headwinds blowing in the face of upward momentum.
SmartStops intelligent risk management software has the short-term and long-term stop for Netflix at $239.64