(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of NFLX.)

Netflix Inc. (NFLX) shares have seen a monster rise so far in 2018, with the stock up by nearly 30 percent through February 8, despite falling by almost 12 percent since January 29. But an analysis of its trading chart shows the stock could fall further, perhaps back to $225. That's a decline of roughly 10 percent from its closing price of $250 on February 8. Shares broke a critical support level at the $245 level in early trading on February 9. 

Shares of Netflix rocketed higher after the company reported better-than-expected fourth-quarter earnings on January 22 on strong subscriber growth. That sharp rise pushed shares of Netflix up to nearly 48 percent on the year and forced the stock to overbought levels. 

Filling The Gap

The daily chart above shows how the stock gapped higher following 4Q results, pushing the stock to nearly $287. But that big jump from roughly $228 to $249 created almost a 10 percent gap in the chart. And with the stock falling below the base of the gap at $248.90, it could create a vacuum back to the $228 level. 

The one positive is that should the gap be filled, it will likely result in the stock following its previous trend, which is higher, and could provide traders with an entry point. 

Overbought Levels

The daily chart also shows how the stock reached an extremely overbought level with the relative strength index (RSI) reaching nearly 92. A level over 70 is considered overbought. (See also: Why Is the RSI Important for Traders and Analysts?)

Despite the recent pullback in the stock, the RSI has only fallen to roughly 51, which means Netflix stock could continue to face more downward pressure in coming days. 

Declining Volume

Additionally, the chart shows that trading volume has been meaningfully declining since peaking on January 23. That could be a sign that the buyer excitement that took over for the first couple of weeks of 2018 is now receding. 

But the good news is that should the stock fall, Netflix will hit a bunch of support levels and rising trend lines, suggesting shares could continue to work higher. 

With all the recent stock market volatility, it's anyone's guess which way any stock goes these days. But it is worth wondering just how much the volatility is distorting the technical patterns in the charts, making them hard to decode.

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.