When Carl Tweets, We Listen. Here’s your trade on Netflix (NFLX) (June 24, 2015)
Netflix ( NASDAQ:NFLX ) announced a 7 for 1 stock split that’s going to go off on July 15th. And then after market last night I featured this in my “Chart of the Day”. The stock gapped up, it was trading up after hours, not quite this much, but it did gap up after hours on news that the company was going to be splitting its stock. Why it does this I don’t know.
I mentioned this last night in the “Chart of the Day,” people made a gang of money back in the 90’s and the first two months, possibly three months, of 2000. And then everybody that was such a genius in the market turned into a imbecile who was wandering around the streets homeless with no money when the market crashed. Everybody would just buy stock splits. It was like, “Oh, Dell is splitting its stock, got to buy call options.” That’s just the way it worked.
Then for a while, over the last umpteen years, sanity has kind of returned a little bit and then nobody really cared too much about stock splits. Well now you’re getting a stock like Netflix ( NASDAQ:NFLX ), and you remember what happened with Apple (NASDAQ:AAPL ) when they decided to split their stock. Everybody got a little juiced up over that too, but then ultimately the stock’s trading like a corpse.
With Netflix ( NASDAQ:NFLX ) the stock jumps up, trades off, jumps up again. Then Carl the “Tweet” enters the picture, he’s dumped his entire share of Netflix ( NASDAQ:NFLX ). Sadly he’s not like Cramer. Cramer tells you what he’s going to do before he does it. Carl the “Tweet” does it then he tells you what he’s going to do. Knowing that guy he probably went, “Oh my gosh! I sold too much, so I was actually short the stock. Now everybody’s sold it off, maybe I’ll cover.”
I don’t really know if he really did that or not, but any big hedge fund manager who trades around the public by “Tweets” is not somebody that I would be too trustworthy of. So instead he’s putting his energy in to pumping up the shares of Apple (NASDAQ:AAPL ). That’s for another day and Apple’s (NASDAQ:AAPL ) Apple; though my brother Gary continues to not like his Apple watch very much.
My point here on Netflix ( NASDAQ:NFLX ) is this: they report a split; the stock gaps up and then trades lower. In other words, buy the news really, really fast and then sell the news when everybody kind of knows it. So the stock split came and went with respect to its influence on the aggressiveness of buyers and sellers of the stock.
Then when Carl comes out and says he’s sold his stake, and that guy made a boatload of money on Netflix ( NASDAQ:NFLX ). He’s been holding it a long time. He sold his stake; if he had sold the last of it in to here he pretty much top ticked it, the stock has been selling off. I want to be short, well it’s a good thing I want to be short because I am short, I didn’t even “Tweet” that out.
Let me show you the trade and show you that there’s still plenty of room for you to be short.
This is massive distribution; this is not just Jake and Billy Bobs Hunting and Trading Booth. This is really institutional selling; over 10 million shares traded. The first big red volume spike right off the top. A 52-week high, all time high, mega high, everybody’s getting high here except the bears.
The stock’s rolling over as I do this video, it is 12:33 on the West Coast, 3:33 on the East Coast.
So now you’ve got a really, really bearish pattern and I’m not talking about specific candlestick patterns. If you’re looking for one of those call it a flying hibachi with a three-tailed snipe. The stock gaps up, it’s trading down, it’s at the low of the day. Who knows if it’s going to close at the low of the day, but I’ll tell you this; it darn sure ain’t closing at the high of the day. There’s no reason for anybody to be buying the stock now, unless they are covering their shorts.
This stock has been trading up in anticipation of a lot of things. Now it’s trading down after news that they’re splitting their stock and so there are lot of folks, the retail guys will be going, will be going, “Well crap, I was going to buy this stock. In fact didn’t Dan even say last night that for one goofy reason people buy this stock in to a stock split? After the stock splits, then you’ve got like seven times the liquidity. There’s going to be plenty of shares to buy. You’re probably going to see a pullback but between now and the split we could see higher prices.”
Okay, that still could be the case, but I know that this is difficult for you to understand, I don’t have Carl Icahn’s cell phone. He has mine, he rarely calls me for information or guidance, sometimes he does, him or Warren, but typically not. And so I didn’t know that he was going to announce that he’s out of the stock. So now suddenly you’re not just getting retail guys but you’re also going to get some money managers.
There are a lot of folks that are momentum oriented, and this has been one momentum oriented stock; they’re going to look at this and say, “Well shoot man, the stock’s up at it’s high. If Carl’s out who am I to fade Carl’s move? I think I’ll clear out of here and go in to Apple ( NASDAQ:AAPL ).” Bam! Right here. Don’t you know that probably happened? Let’s look at this intraday. Well, well, right off the bat, pretty much in sync, it seems like.
So the bottom line is, you need to get out of Netflix ( NASDAQ:NFLX ). Frankly you could get short Netflix ( NASDAQ:NFLX ). Options aren’t that liquid, but I and our esteemed colleagues over at “Option Market Mentor” got short a bear call spread that’s well out of the money; it is the 730, 735’s shorted the 730 calls here, went long the 35 calls as insurance. It’s going to take a lot of juice for this stock get through all this pain and then go up another 5 percent or so to get up to threaten the 730 strike. So I think that’s a good trade.
Also I’m long some puts on it as well, just because every so often I feel just kind of feel like going both ways, that’s just the way I am. So anyway I think you can get short on Netflix ( NASDAQ:NFLX ). The overall trend is still going up, but when I see this kind of volume this kind of reminds me of Ambarella ( NASDAQ:AMBA ) on that one fateful day last Thursday.
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