Streaming giant Netflix is on its way to making new highs, but it needs to crack one key level first, according to TradingAnalysis.com founder Todd Gordon.
"Netflix is acting very feisty up around this $340 level," Gordon said Tuesday on CNBC's "Trading Nation." He expects the stock to break above that level soon and soar to uncharted territory. Here are his reasons why:
— The $340 level marks consolidation at the end part of a "beautiful uptrend" that has been in place. Not only that, but the stock has risen to close to that $340 a few times, only to fall back and retest again.
— Gordon noted that call option open interest has exploded in the stock.
— As a result, Gordon wants to buy the June monthly 340-strike call and sell the June monthly 350-strike call for a total of $3.04, or $304 per options spread.
— If Netflix closes below $340 on June 15 expiration, Gordon would lose the $304 he paid for the trade. But if Netflix were to close above $350, then Gordon could make up to $696.
The trade: Gordon is suggesting buying the June monthly 340/350 call spread for $3.04, or $304 per options spread.
Bottom line: Gordon believes that $340 is a support level from which Netflix can rally to new highs.