Wanting to do something with Netflix (NFLX)? Here’s your trade…depending on your timeframe! (October 18, 2017)
NFLX
I am looking at Netflix ( NASDAQ:NFLX ) today and here is why: First of all, you have got to respect the uptrend. Love this type of thing, love it. Second of all, you have got to look at the highs and the lows are basically right at the 50-day moving average. If we are going to draw a trendline though, this is really kind of where we want to draw it as far as resistance here. You can even take this and move it along here, that was a breakout to the upside. All I did, by the way, is pick this point and then start connecting the dots here. This was clearly a breakout, you can’t curve the trendline up. And then this is back down on trend, then finally it has pulled back here.
My point is this, the company reported earnings. Pretty solid, massive user growth and they are actually projecting a higher number of users added next month, I want to say like 6.3 million as opposed to 5. But I could be wrong, a million here a million there, what does it matter? They are actually projecting more growth next quarter, but look what the stock did: Big volume here on Monday and then even bigger volume there on Tuesday and then now the stock is kind of back down to a normalized level. Well, I am looking at this as kind of a capitulation day. The stock ran up to 205.00, couldn’t get above that. Yes, it is a higher high but now we have got, let’s just say some selling pressure. At 11 million shares and the stock is down 2 percent, that is just a stock that is not under accumulation right now.
So what is your trade? First of all, if you are a believer in Netflix ( NASDAQ:NFLX ) you don’t have a trade, you just hang onto the stock. This is what the stock does, it is what every stock does, red bars, green bars, white bars, solid bars. This is what the stock does but it is running higher. So you stay long, you don’t do a thing, nothing. Stay long the stock, it is going higher.
If you are a trader you can short this stock. Your stop would be right at a new high. You are risking like 5.5 percent. For me, what my expected downside would be, I would look for this thing to test the 50-day moving average, that is 7.5 percent, so your possible reward is a little bit more than the risk that you are taking, but you are putting the chart on your side. I am not sure what a catalyst would be tomorrow or the next day or next week, that is going to all of the sudden make Netflix ( NASDAQ:NFLX ) up into a new high; unless Amazon ( NASDAQ:AMZN ) decides to buy it, which they could always do, but I don’t want to start a rumor.
So I think the bottom line is, the catalyst for buying is behind us and now the stock is settling in, so consider that. But again, I can’t emphasize this enough, guys, the long-term trend is up. Just stay long this stock. Don’t be selling it. Don’t get down deep into the weeds here and start looking at this. Or, “Let me look at the 50. Oh my gosh! I have got to sell this stock!” No, this is what a trader does, it is not what a long-term holder does.
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