Netflix (NFLX) — heart throb or heartbreak? Watch these levels. (December 31, 2015)
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I’d be really careful about Netflix ( NASDAQ:NFLX ) right now. It is in, I would say, it’s forming a high base. The stock has been drifting sideways for about 6 months. I think I’ve mentioned this recently, it’s kind of a “cup and handle” (I’m really bad at drawing, particularly with a mouse), here’s the handle. And then you want to look for a breakout here to the upside. But one of the things that’s got me a little hesitant about this is the potential that this could indeed be a double top. We won’t really know that until the stock tests this 200-day moving average. Or breaks out above 130.00. So right now, frankly, it’s in “no man’s land” and there’s like a $30.00 range here between resistance here of 130.00 and down at 100.00 at support.
One of the things that kind of gives me a little bit of extra caution or pause is, that I think Netflix ( NASDAQ:NFLX ) was the number one performing stock in the S&P in 2015, and Amazon ( NASDAQ:AMZN ) was number two. I might have the order reversed. But you know what? I really don’t care. It was a top performing stock and now we’re getting this kind of top, “toppy” looking thing. If we look at Apple ( NASDAQ:AAPL ) we had a similar thing here with what turned out to be kind of a triple top. Now, back here few people were really too concerned about Apple ( NASDAQ:AAPL ) with this potential double top because after all it was Apple ( NASDAQ:AAPL ). Right? And then we ultimately got this kind of breakdown.
I saw in Fast Money, I noticed that they’re talking about Netflix ( NASDAQ:NFLX ) and then Amazon ( NASDAQ:AMZN ), and would you hold these stocks? Would you hold Netflix ( NASDAQ:NFLX ) going into 2016? And the answer was pretty much a resounding, yes. Now, that could very well be the case, and this is not any reflection on those guys that were saying they would. What it is a reflection of is, the “bullishness” of people that are knowledgeable on Wall Street; some of those guys sitting around the desk. So when I see that, and then I see the stock’s kind of “toppy” and see what’s happened to some of these other stocks and I hear about all the great things that Netflix ( NASDAQ:NFLX ) is doing, which it is. Hey, it just makes me wonder if all of this optimism is not already “baked” into the stock.
So this is what I would suggest: absolutely under not circumstances are you to buy this stock if it’s underneath the 50-day moving average. You could say,”Well Dan, I’m missing out on a good buying opportunity.” Dude, you’re what? You’re 1.6 percent below the 50-day moving average, that’s what you’re missing out on, this is not the buy of a lifetime. It’s kind of a higher risk buy, because this stock could fall back down to this level, we’ll say about 103.00 or so, in a few trading days with the 200-day moving average. But the stock really isn’t quite at support. It’s just down at the 50-day moving average and not performing that well.
So I think this is really an area, down here, that you should just be avoiding the stock because it’s not in an uptrend. It depends on how you define an uptrend, you could look at the 200-day moving average and say, “Dan, hello, that is an uptrend.” That’s correct but if you look at the 50-day moving average, it’s been flat, it’s been down, it’s been up, now it’s just starting to take off sideways. So this is not just this massive uptrend where you’ve just got to hop on board. This stock can consolidate for a while and this is what I would do: I would absolutely stay out of it here. Then if the stock happens to come back down and test 100.00 you’re going to know a couple things.
First of all, you’re going to know that it’s a low risk buying opportunity for the pure and simple reason that if you buy at 100.00 and the stock trades down to 97.00, 96.00, 95.00 you don’t want to be long this stock, because the channel is now breaking down. Also, if it falls back down to 100.00, before you buy the stock, then you will know that you were not right to buy the stock at 114.00. Guys, and ladies, this is just logic. And so as long as this stock is drifting sideways like this you don’t have to be in any hurry to buy this stock. No hurry whatsoever. We don’t know what it’s going to do between now and when the company reports earnings, I think that’s in January. You saw what it did last time, it was a heck of a move. But there’s a lot of time between now and then, so lets just focus on that aspect of it, and I want you to stay away from Netflix ( NASDAQ:NFLX ).
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