Netflix, Inc (NASDAQ:NFLX) was trading slightly lower on Monday as the stock continued to consolidate the 17% rally that took place between March 14 and March 22.

The rise, paired with the consolidation, has caused Netflix to settle into bullish flag patterns on the daily chart. The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines.

• For bearish traders, the "trend is your friend" (until it's not) and the stock may continue downwards within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
• Bullish traders will want to watch for an upward break from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.

A bull flag is negated when a stock closes a trading day below the lower trendline of the flag pattern, or if the flag falls more than 50% down the length of the pole.

See Also: Apple Beats Netflix To Win Best Picture Oscar As Online Streaming Takes The Limelight

The Netflix Chart: On March 14, Netflix reached a 52-week low at the $329.82 level and reversed course, soaring up to the $386 level on March 22 before entering into a multi-day consolidation phase. The rise up, paired with the horizontal consolidation pattern, has settled Netflix into a possible bull flag pattern on the daily chart.

• On the weekly chart, Netflix is also settling into a bull flag, which could end up being the dominant pattern if Netflix doesn’t break up from the daily bull flag over the coming days.
• The measured move of the pattern is 17%, which indicates Netflix could trade up toward the $420 level if the bull flag is recognized.
• Bullish traders can watch for Netflix to break up from the flag on higher-than-average volume, which would indicate the pattern was recognized. Bearish traders can watch for Netflix to continue trending down within the parallel trendlines of the flag until the stock closes the trading day below the $357 level, which will negate the pattern.
• Netflix has a gap above on the chart between $458.48 and $506.93. Gaps on charts fill about 90% of the time, so it’s likely Netflix will trade up to fill the empty range in the future.
• Netflix has resistance above at $386.89 and $409.16 and support below at $364.76 and $352.40.

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