Updating your Netflix (NFLX) trade. (June 25, 2015)
I’m looking at Netflix ( NASDAQ:NFLX ) one more time. Well, we’ll take a look at it again, but only when it does something technically interesting, right now it’s really not, it’s really just doing more of the same. This is what I’m talking about, and if you’re just watching this “Chart of the Day” video for the first time, or you haven’t seen the last few I’ve done on Netflix ( NASDAQ:NFLX ) please check it out, because it’s actually a pretty good transition in technical analysis, as far as how you really look at a stock.
First of all: if we didn’t know that the company was splitting it’s stock on July 15th, what would we see? We would just see a trend, just a continuing uptrend that’s very, very reliable. And we would look at this, two-day pullback. Here we’d say, “Well what the heck happened there?” Something really big went on there. So we’d look it out and we’d ultimately see that it was a split. And for whatever reason everybody just decides to jump onboard on the sale side because guess what? Carl the “Tweet” is no longer in Netflix ( NASDAQ:NFLX ) and so by golly everybody else wants to get out too.
Okay, that’s fine. So everybody who trades along with Carl, or actually a little bit after Carl, they’re out of the stock and now we’re right back to support again. So really we’re back where we started. We got a big pop on the split and then, “Oh crap! Carl’s out, we’ve got to get out too.” So he’s out. The stock’s right back to support at the 20-day moving average. Do you know what I say? I say buy, because this is just one big flush. It’s a two-day flush and now lets look at the intraday chart here.
This is just today I want to look at. Forget about this, that’s literally yesterday’s news. Here, we’ve got a continuing gap, remember this is a gap, it’s like a, I don’t know what you call it, not an abandoned baby, but something, and it ain’t good. The stock traded down, never came back to test this level, but it actually hit the low at about 10:30 in the morning. Interesting how stocks finally finish whatever move they’re going to make, just about straight down. Then the stock drifted sideways. Well what do we have?
We’ve got this massive selling volume, which is just more of the same from here. And after this massive selling volume is over, you’re just getting a light little trading here. Not much volume at all in these five-minute bars, 43,000 shares traded in a 5-minute bar here just right in the middle of lunch. So there’s just not much going on, including more selling. So the stock squeezed and popped out of the squeeze towards the end of the day. Now we’ll go back to a daily chart, and this is why I say, “You know what? The path of least resistance on this puppy is still higher.”
So you go ahead and buy this stock, and yes, it is extended above the 200-day moving average. Not quite so extended above the 50, but nothing has changed fundamentally about the company and this stock can continue to drift upwards until July 15th when they split 7 for 1. Now, after the split, will the stock continue to move up? I don’t know. One of two things is going to happen, it either will or it won’t; neither one of those outcomes matters right now on June 25th. So we go ahead and stay with this trend and then once the stock splits, then we’ll figure it out.
Free Chart