Netflix (NFLX) looks a lot like Ulta Salon, Cosmetics & Fragrances (ULTA)…only different. (October 18, 2016)
NFLX ULTA NFLX
I want to look at Netflix ( NASDAQ:NFLX ) today. They reported earnings that kind of blew everybody away, certainly those folks that were short the stock. It was a bad bet to short this stock at the open; I actually took a very small position somewhere around 15-minutes in, or something like that, and I almost IMMEDIATELY closed it. I think the money I paid on the commission is the biggest loss that I had. I immediately closed it because I just knew it wasn’t right to be short. But that doesn’t mean that you pivot and go long, because the stock was UP so much right at the open, it was actually pretty interesting. This morning I posted that when a stock has this kind of move up you have to look and see who is really in charge. As I look at this, certainly even throughout the day, I don’t see the bulls in charge. The stock opened here, but it basically was drifty all day long. Most of the move happened right in the morning. You can see where the volume bars are, the first 20-minutes or so of trading was just about all of the volume.
So here is what I am suggesting: There is absolutely no way I would buy Netflix ( NASDAQ:ULTA ) now. Now, I will be watching a lot more of Netflix in the near future because I am absolutely cutting the cord, that’s all. But, that doesn’t mean that I want to buy Netflix ( NASDAQ:NFLX) right now. I am looking at Netflix ( NASDAQ:NFLX) and I am thinking Ulta ( NASDAQ:ULTA ). Everybody got so lathered up on THEIR earnings report, the stock gaps up and keeps going. Well look at where this opened the following day after this kind of move. The stock went up almost 12 percent. It actually gapped up the next morning, not a lot, close to a percent, not quite. It gapped up the next morning so you have got to be wondering, who was thinking that they would buy this stock after THIS kind of move higher? Who would buy this stock? Well, somebody did, but that person is losing money now. So the stock gaps up, you buy at the open and now you are down 3.5 percent.
My point is, when you see a big move like this, wait a few days. You hear the standard rule of thumb, “Wait 3 days”, shoot I’ll say wait 5, wait 10. This thing isn’t going anywhere anytime soon. This move could kind of be done because (I hate to burst any bubbles) this was a high, so far this is a lower high. Now you won’t really be able to count it as a lower high until the stock actually makes a lower low. Until it makes a lower low we can’t say that this is a lower high. We can just say the stock came up to here and is consolidating. It could still go up and make a higher high. But for the time being we don’t want to be here. So Netflix ( NASDAQ:NFLX ), I look at this and see really the same exact thing, a big, huge move up. If the market opens up tomorrow, if there is a strong open, this thing could gap up a little bit.
If it is me, I am selling into that. And if it is you, I am just suggesting, you take profits on this if you have got them. You don’t have to sell them all because that way if the stock goes up to 150 points you are only half mad at me. But, if you are holding the stock now and then it ultimately starts falling below the open here of 116.63, you DEFINITELY want to get out of that stock. I am going to set an alert. If this alert is hit you are going to get a video (members) you don’t want to be long this stock if it falls below 116.63. So that is how I am trading Netflix ( NASDAQ:NFLX ) and Ulta ( NASDAQ:ULTA ).
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