Here’s the long and short on Netflix $NFLX – January 24, 2024
This is Dan Fitzpatrick with FITZ IN FIVE. Let’s take a quick look at Netflix ( NASDAQ: NFLX ).
The stock gapped up like 10 percent, almost 10 percent. That’s a stock that you have got to fade. Whenever a stock gaps up 10 percent, the reflex is, that you have got to sell into that stock. The reason you’ve got to do that is because only traders who’ve got the reflex of buying the stock are retail traders who want to make sure they get in on a good thing.
They think they will get credit as if they bought the stock yesterday or the day before. You want to trade against the lowest common denominator. You want to trade against the guys wearing the dunce caps rather than the Rolex watches, and there are very few that wear both.
Selling into this kind of move is the right thing to do, but it didn’t work out that way this time. If we look at it here, the textbook trade would have been, the stock opens up, I think it wiggled around a little bit if I’m not mistaken, not much, but the textbook trade is to go ahead and sell into this move and take your profits.
I would never short something like this, not with that kind of move because it popped out of a squeeze. But you go ahead and sell into this, but this time around, that totally didn’t work at all. Typically, the way traders work, it used to be the 15-minute chart that I think desk traders traded off of. These days, with order flows and all that, I think it’s more like maybe the 5 or possibly the first 10 minutes of the day.
But when a stock gaps up like this, if it is not back below the opening print within 5 or 10 minutes. They’re not going to be selling the stock, they are going to be buying it. The idea is, I don’t want to be buying the stock here. I don’t want to be buying the stock if now it’s down here, 5 or 10 minutes in.
You don’t want to be buying the stock here because the only reason it’s down lower than the gap is because there’s nobody with enough money to buy it, that’s going to soak up all the selling from people who bought here and they are now selling into their stock. If the stock is down here, they’ won’t not going to be doing that.
However, if the stock is up here, 5, 10, 15 minutes, they’re certainly not going to be selling the stock here. They are probably going to wind up buying it. And so that’s what happened here today, the stock didn’t fall, as you might think, and so traders came for the stock and they just kept going.
You can see on the NASDAQ ( NASDAQ: QQQ ) here, SPY ( NYSEARCA: SPY ), the same thing, everything petered out around 1:00 or so. Netflix ( NASDAQ: NFLX ) was earlier than that, it petered out still during the first hour of trading.
This is my suggestion, don’t be buying Netflix ( NASDAQ: NFLX ). I’m actually short, not the stock, but I sold some 570.00 calls that expire, they actually expire next Friday, not the day after tomorrow on this Friday. I sold some 570.00 calls because I’m pretty confident, not supremely confident, but I’m pretty confident that this stock is not going to have the juice to get back up above there, at least not right away.
That’s my trade on Netflix ( NASDAQ: NFLX ). Do I think, ultimately, it goes higher? Yeah, I do, look at this, it’s a pretty good move, it’s not as good as NVIDIA ( NASDAQ: NVDA ), but the stock is still in a really, really nice uptrend. You just have to give the stock some time to breathe.
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