Netflix (NFLX) technical analysis - Netflix (NASDAQ:NFLX)

Trading in Netflix, Inc. NFLX is quiet Wednesday as the stock continues to consolidate. But there is a chance the recent uptrend may be about to resume.

The price action in the stock may be creating a classic ‘Flag Pattern'. It has bullish implications and suggests that the shares may move higher. This is why it is our Stock of the Day.

Technical analysts look for patterns on charts. These patterns form as a result of the price action of a stock.

For example, if the leadership of a market changes from bears to bulls or bulls to bears over an extended period of time, it may appear on a chart as a ‘Rounded Bottom' or a ‘Rounded Top.'

If the leadership changes in a single day, it may form a ‘Reversal Day' pattern. If the change takes place over a few days a ‘V Top' or ‘V Bottom' may show up.

These are reversal patterns.

There are also ‘continuation patterns.' These appear when a stock has gotten ahead of itself and is taking a break. When this consolidation is over, the trend will resume.

A classic ‘Flag' continuation pattern seems to be forming on the chart of Netflix. It suggests that a new uptrend may be about to begin.

Sometimes, when there is aggressive buying that pushes a stock higher in a short period of time, some of the traders and investors that are doing the buying get frustrated. They wanted to pay lower prices.

Some think that if they step out of the market for a few days, the price may fall. So, they move to the sidelines hoping they will get a better price.

Because of this, much less volume trades than did during the move higher.

If, after a few days, the price doesn't decline, they jump back into the market and resume their buying. This can push the stock into a new uptrend,

As you can see on the chart below, Netflix seems to be forming a classic flag pattern. It has been consolidating on low volume but hasn't gone lower. A new uptrend may be about to begin.