Why I Like MCP & NFLX Calls & What They Say About the Market

The fact is, most traders get "stock-picking" completely wrong or at least backwards, they pick the stock and then hope the market moves in the direction of their trade.

The largest gravitational pull on any stock's price is the market's direction itself, I'd say it accounts for about 65% of the stock's move. 

The Industry and Sub-Industry Groups are next, whether they are in rotation or not has a lot to do with how the stock performs. In the recent Homebuilder rally it wasn't 1 or 2 stocks in the industry group, it was a majority.

Least important is the actual stock itself other than stock specific events like earnings, news, etc.

The point is, start with the market, then refine to the sectors and then find the stock.

Here's what I see in these two and why it seems to back up the theory I have about a market "W" base launching an emotional strike against traders which it tries on Tuesday and failed.

 NFLX 5 min with a head fake move to the left right before the downside reversal which morphed in to a capitulation shakeout with a vertical drop that turned in to a rounding bottom and it looks like it already had a stop run/head fake move to the right below the yellow trrendline. Volume is right for the price pattern as well, but more importantly 3C is leading positive in a big way.

I may not hold this NFLX call through the entire possibility of a nice upside move because the volatility is just a killer with options right now, but I would likely keep coming back, hit and run, hit and run.

MCP

 MCP's 5 min chart shows a different type of accumulation pattern, the kind that few notice. This is what I compare to, "The kids in the room next door are a little too quiet", you just know they're up to something.

This is a tight rectangle trading range, this is one of the most often seen price patterns when it comes to accumulation or distribution. I believe the pattern is so tight because market makers or specialists (depending on where the stock is listed) are working an order that has a specific fill, like filling at VWAP, so as I pointed out in the market yesterday, once price runs above VWAP in an accumulation phase, the middle man (MM or Specialist) will let out a little supply or flash misleading quotes, work the bid/ask spread and do whatever it takes to halt price and send it back to the accumulation zone near the bottom. The same happens with distribution. These patterns are always small volume as they don't want to attract any attention.

It's not just retail or other institutional funds jumping in and driving prices up while they are trying to accumulate, but worse it's the predatory HFTs that seek out "Icebergs", which are big orders being filled in small increments as to not attract attention, like an iceberg only the tip is visible, the bulk is below the water line. So these HFTs will ping the market until they identify an iceberg and then they'll front run them forcing the institution to pay higher prices for the order as the HFT sells to them and in a way becomes a malevolent market maker.

MCP 15 min leading positive as well. I thought I'd point out the head fake moves just before reversals and at "A" a "Tweezer top" candle stick formation-even on a 15 min chart it works as a reversal pattern like it would on a daily chart-that's the fractal nature of the market.

In any case, I don't see how or why anyone would accumulate a bounce this large is they didn't think the market could support it.