It could be the moment of truth for Netflix.
On Monday, shares of the streaming video giant gained more than 3% after William Blair analyst Ralph Schackart reiterated a bullish note saying the stock can rise 22% by the end of the year.
But Monday's move is somewhat of an exception for Netflix — at least in recent memory. The stock may be up 31% on the year, but all of those gains took place in the first two weeks of 2019. Since then, the stock has been stuck in a tight trading range, meaning it has vacillated between levels without actually making a move in either direction.
According to research firm Bespoke, this is Netflix's tightest trading range on record, which means that after such a long period of consolidation the stock could be poised for a big move higher — or lower.
After examining the charts, Fairlead Strategies' Katie Stockton sees a higher move, saying the stock has reached oversold levels. The media giant is also trading above its 200-day moving average — a key technical indicator showing a stock's trajectory — which Stockton believes signals a continuation of a long-term uptrend.
"There's a couple of things working for the chart. It's in a long-term uptrend. We do tend to look at ranges within long-term uptrends as continuation patterns, and of course strong support and a strong tape," she said Monday on CNBC's "Trading Nation."
But first, the stock must surpass $387 — about 11% above Monday's closing price of $351 — since that's the level that has provided overhead resistance in the past. If the stock can break above $387, Stockton thinks it will climb even higher.
"We need to see some kind of breakout of course from this range for a positive long-term technical catalyst, but Netflix is oversold after having underperformed, so it's at this proving ground right now on its chart," she said.
Netflix trades at 78 times forward earnings — the most expensive of the FAANG stocks. Point View Wealth Management's John Petrides said that valuation is unjustified, given a slowdown in subscriber growth and an increase in streaming competition.
"The valuation is just really excessive," he said. "The market knows that they have a first-mover advantage in streaming, but that's really discounting very high future cash flows."
Despite that advantage, Petrides said, Netflix is in an unfavorable position relative to peers when it comes to content because "they don't have a library" and instead buys original content.
"They're burning through $2 - $3 billion a year in free cash flow. The moment that stops is when I think ironically the valuation comes flying out of the stock," he said.