A big day at the movies for Netflix (NFLX). Here’s a preview of coming attractions. (January 23, 2018)
NFLX
I want to look at Netflix ( NASDAQ: NFLX ) today. Here is why: If you are long I think you have got to sell; simply because I think the path of MOST resistance is actually higher. I am not saying the stock is going to tank it is actually pretty impressive that it has stayed up 10 percent after it had just been down here in December. The stock is up 33 percent in three weeks of trading. That is pretty impressive. You don’t really want to bet against this. If we look at the Sigma Bands where we are looking at the standard deviations out to three, then this stock actually hit above the third standard deviation.
Now, the stock is supposed to stay below the upper band and above the lower band 99.9 percent of the time. In other words, it is like a stock market felony for the stock to be above this. So when it traded up to 255.00 it was almost a simple thing that you just kind of knew the stock was going to peter out. Anything can happen but you look at the way this stock traded and it actually set up what was looking like a pretty good short right after the first few minutes of trading.
I was itching to short the thing and did right around the 254.00ish level, something like that. I was holding it, it was down here but I was looking for more frankly, not because I was greedy but just because I really kind of felt like if it broke 250.00 it would probably move a little bit lower. So I held it and then I wound up ultimately getting stopped out for essentially a break-even. I think I might have made a little bit on it but it was so close that you don’t even really count it.
The fact that the stock was up this much and then it just drifted sideways and never really went down, that shows a LOT of buying pressure; a LOT of interest in this stock. So that gives me the sense that this is not going to be a stock to really move down much. It might move down a little bit but there is obviously demand for this stock around the 250.00 level. The way I look at this chart though, and the way I see the stock trading, I just don’t know that the demand for the stock is going to be that such that it is going to soak up all of the supply above 250.00 and then just keep on reaching for higher prices. I don’t see that happening.
So my suggestion would be sell if you are long. Sell some of your position you certainly don’t have to sell all of it I think you always want to be trading fractionally, trading in percentages, getting out some here, some there, so give the stock a chance to make you some more money. But I wouldn’t be buying it here. I would consider, if you are an options trader, selling some out of the money calls.
I have a couple things going on here, I sold the 250.00 calls, bought the 260.00 calls. Sold the 275.00 calls, bought the 285.00 calls. So we have a lot of credit from these option trades and we will lose money if this stock continues to go higher. We will make money if the stock trades sideways or trades lower. Am I talking my book? Absolutely, I would always talk my book; not because I am really thinking that with 27 million shares traded today anything that I say is going to move the stock. But I am just saying, I trade them like I see them and I think the way to trade this is to just anticipate some sideways to down moves. That is the way I would do it.
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