Here’s the level to watch on Netflix (NFLX). (April 19, 2016)
I want to look at Netflix ( NASDAQ:NFLX ). Here’s a weekly chart. The company reported earnings last night and they kind of lowered their guidance on subscriber growth. Since that’s where the revenue comes from, that’s kind of a big deal. You can see the stock on this weekly chart, it’s down well below 100.00. We’re going to look at the daily chart in just a second, but lets just look at this for a second. The stock had been in a pretty nice uptrend as it was here, then it just consolidated for a while, and I’ll let you do the math; it was like about a year. Now we’re looking at the end, in my view, of this uptrend, which was about the middle of last year. This stock now is just trending sideways again. Now I don’t want to be too dogmatic, I see some technical analysts they just keep drawing lines and assume that everything is just going to keep going that way until forever. I’m not that guy, but I will say, trends in motion tend to stay in motion, so this is worrisome. This lower high here is worrisome. But we’re really not going to be able to classify this as a broken consolidation. In other words as a top, as opposed as one of these, where the stock just continued on up after it broke out.
We’re not going to be able to classify this as a top until the stock breaks down below $80.00. So you’ve got about $17.00 of downside before you should start thinking, maybe this deal is over; kind of like Apple ( NASDAQ:AAPL ) was, they basically peaked when Steve Jobs passed away and ever since then been struggling. But when we look at the daily chart I just want to trade this. I see this double top. Again it’s kind of reminiscent of Apple ( NASDAQ:AAPL ) back here, and then we got a triple top. And then as Cark Spangler said, “And that’s all she wrote.”. So now we look at Netflix ( NASDAQ:NFLX ), and it could be the same thing. But for a trade here’s what I would suggest: I was really hoping that $100.00 would hold on this pullback, but it didn’t. I’m just dropping it down now to $95.000. Again, the real long-term view is, $80.00 needs to hold. But I’ve got to tell you, I’m not buying a stock here at $96.00 and holding it down 15 percent. Only to then start wondering whether the stock’s going to bounce.
If you’re buying this stock now, here’s what I would suggest, and I’m doing this video intraday, but you can look, volume is almost what it was yesterday and yesterday was a high volume day. Today’s intraday low is 95.70. I think, if you’re buying this stock, or if you’re already long this stock, keep a stop not at 95.00, but a little bit below 95.00, make it 94.83. How’s that? Pick your number, just don’t make it $95.00. Because a lot of times stocks have this was of falling down to the even number and then bouncing. You might want to check and see how this one worked out. Or this one worked out, rallying up to the even number and then selling off. So if you’re long this stock of if you’re thinking about taking a shot, just define your risk at a little under $95.00 and I think that’s going to get the job done. And here’s the other thing, and this is really, really important, when you’re trading you’re going to lose money, you’re going to make money too. If you can’t handle both, then you need to find something else to do. I don’t know, go work at a fast food store or a convenience store. But you can’t be trading if you don’t understand that you’re going to take losses.
The idea is to define your loss as a part of your trading plan before you get in here. So, lets say you set your stop at 94.83. You’re buying the stock at 96.50, so that means you’re taking a risk of $2.50, that takes you down to 95.00, then another 17 cents, so $1.50. so $1.63 is what you’re risking. You buy a hundred shares, you’re risking $163.00. You have to look at that amount that you’re risking and that needs to be, frankly, less than one percent of your entire portfolio. Less than one percent. That means that as long as you’ve got your stops defined, you can take a whole bunch of losses in a row and you’re still okay as far as you’re trading account goes. But all it takes is one misstep, one big blowout and you’re going to spend years trying to make up for that. Try this on Netflix ( NASDAQ:NFLX ), if you like the stock above $95.00. I’m not saying it’s going to bounce. If I thought if it was then why would I even recommend a stop? But that’s your plan, you keep your stop, you keep your risk defined. You know where you’re getting out on the downside. You know how many shares you’re buying. If the stock starts moving back up to 105.00 or so then you keep a really tight stop and that’s a nice trade for you.
Free Chart